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KB Home Cheers Investors With 67% Quarterly Dividend Hike
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KB Home (KBH - Free Report) announced a hike in dividend payout, thereby maintaining its 30-year long-standing commitment of increasing stockholder returns. The board of directors has approved a 67% hike in its quarterly cash dividend to 15 cents per share (60 cents annually) from 9 cents (36 cents annually). This new dividend will be paid on Nov 26, 2020 to shareholders of record as of Nov 12, 2020. The dividend yield, based on the latest payout and Oct 8 closing market price, is approximately 1.5%.
This hike is reflective of the homebuilder’s achievement of increasing both scale and profitability, improving asset efficiency, along with monetizing deferred tax assets under the Returns-Focused Growth Plan, which in turn enabled it to generate solid operating cash flow.
Jeffrey Mezger, the company’s chairman, president and chief executive officer, said, “As we have become a larger and more profitable company, generating significantly higher operating cash flow, our Board approved a meaningful increase in our cash dividend for the second consecutive year.”
What’s Driving the Dividend Policy?
KB Home has been witnessing stellar demand on the back of resilient housing market, given lower mortgage rates. Recently, the company reported impressive third-quarter fiscal 2020 results. The top and bottom lines topped the Zacks Consensus Estimate by 11.6% and 66%, respectively. Earnings grew 13.7% on a year-over-year basis, given solid housing gross margin.
Net orders increased 27% from the prior-year quarter to 4,214 homes in third-quarter fiscal 2020, marking the highest third-quarter level since 2005. Value of net orders also rose 29% from the year-ago quarter to $1.64 billion. Net orders were up 11% in June, 23% in July and 50% in August.
Moreover, for the first five weeks of the fiscal fourth quarter, net orders increased 39% from the comparable prior-year period, propelling KB Home’s growth for 2021.
Also, it is well positioned amid this ongoing period of uncertainty, backed by a strong balance sheet and $1.51 billion of liquidity. The company ended the fiscal third quarter with $722 million cash and cash equivalents, as well as $787.6 million of available capacity on the $800-million unsecured revolving credit facility. At fiscal third quarter-end, KB Home’s net debt to capital reduced to 28.6% from 32.4% in the prior quarter.
The company’s Returns-Focused Growth Plan and built-to-order approach have been helping it to boost returns. KB Home is also focused on the core KB2020 business strategy, which aims to boost scale in the existing geographic footprint, improve profitability per unit, generate higher operating margin and drive earnings, while generating positive cash flow to redeploy for growth as well as debt reduction.
Share Price Performance
KB Home has gained 31.2% over the past three months, outperforming the industry’s 29.3% rally. Earnings estimates for fiscal 2020 have moved 0.7% upward over the past 30 days. The upside can primarily be attributable to a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in six of the trailing seven quarters.
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
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KB Home Cheers Investors With 67% Quarterly Dividend Hike
KB Home (KBH - Free Report) announced a hike in dividend payout, thereby maintaining its 30-year long-standing commitment of increasing stockholder returns. The board of directors has approved a 67% hike in its quarterly cash dividend to 15 cents per share (60 cents annually) from 9 cents (36 cents annually). This new dividend will be paid on Nov 26, 2020 to shareholders of record as of Nov 12, 2020. The dividend yield, based on the latest payout and Oct 8 closing market price, is approximately 1.5%.
This hike is reflective of the homebuilder’s achievement of increasing both scale and profitability, improving asset efficiency, along with monetizing deferred tax assets under the Returns-Focused Growth Plan, which in turn enabled it to generate solid operating cash flow.
Jeffrey Mezger, the company’s chairman, president and chief executive officer, said, “As we have become a larger and more profitable company, generating significantly higher operating cash flow, our Board approved a meaningful increase in our cash dividend for the second consecutive year.”
What’s Driving the Dividend Policy?
KB Home has been witnessing stellar demand on the back of resilient housing market, given lower mortgage rates. Recently, the company reported impressive third-quarter fiscal 2020 results. The top and bottom lines topped the Zacks Consensus Estimate by 11.6% and 66%, respectively. Earnings grew 13.7% on a year-over-year basis, given solid housing gross margin.
Net orders increased 27% from the prior-year quarter to 4,214 homes in third-quarter fiscal 2020, marking the highest third-quarter level since 2005. Value of net orders also rose 29% from the year-ago quarter to $1.64 billion. Net orders were up 11% in June, 23% in July and 50% in August.
Moreover, for the first five weeks of the fiscal fourth quarter, net orders increased 39% from the comparable prior-year period, propelling KB Home’s growth for 2021.
Also, it is well positioned amid this ongoing period of uncertainty, backed by a strong balance sheet and $1.51 billion of liquidity. The company ended the fiscal third quarter with $722 million cash and cash equivalents, as well as $787.6 million of available capacity on the $800-million unsecured revolving credit facility. At fiscal third quarter-end, KB Home’s net debt to capital reduced to 28.6% from 32.4% in the prior quarter.
The company’s Returns-Focused Growth Plan and built-to-order approach have been helping it to boost returns. KB Home is also focused on the core KB2020 business strategy, which aims to boost scale in the existing geographic footprint, improve profitability per unit, generate higher operating margin and drive earnings, while generating positive cash flow to redeploy for growth as well as debt reduction.
Share Price Performance
KB Home has gained 31.2% over the past three months, outperforming the industry’s 29.3% rally. Earnings estimates for fiscal 2020 have moved 0.7% upward over the past 30 days. The upside can primarily be attributable to a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in six of the trailing seven quarters.
Zacks Rank
KB Home currently carries a Zacks Rank #3 (Hold). It shares space with Lennar Corp. (LEN - Free Report) , Meritage Homes Corporation (MTH - Free Report) and Toll Brothers, Inc. (TOL - Free Report) in the same industry, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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