KB Home (KBH Quick QuoteKBH - Free Report) hiked the quarterly dividend by 12.5%, maintaining its 35-year-long commitment to boost stockholders’ value.

This leading homebuilder announced a quarterly cash dividend hike, paying 20 cents per share (80 cents annually) from 15 cents (60 cents annually). This new dividend will be paid on Aug 17, 2023, to shareholders of record as of Aug 3. The dividend yield, based on the latest payout and Jul 13 closing market price, is approximately 1.5%.

The hike is reflective of KBH’s achievement of increasing both scale and profitability, improving asset efficiency and monetizing deferred tax assets under the Returns-Focused Growth Plan, which in turn enabled it to generate solid operating cash flow.

Enhancement of Shareholder Value

Since 2016, KB Home has been pursuing a Returns-Focused Growth Plan, designed to drive revenues, homebuilding operating income margin, return on invested capital, return on equity and leverage ratio. The company is now in a better position to expect meaningful growth in the future, attributable to the increase in backlog and its ability to match housing starts to net orders.

KB Home ended the second quarter of fiscal 2023 with $557 million in cash and cash equivalents, up from $328.5 million at fiscal 2022-end. The company has a total liquidity of $1.64 billion, including $1.08 billion of available capacity under the unsecured revolving credit facility, with no outstanding cash borrowings.

Additionally, the company ended the quarter with a debt-to-capital of 30.9%, down from 33.4% in fiscal 2022. It also repurchased approximately 2.2 million shares of its outstanding common stock for $92.1 million.

Investors always prefer a return-generating stock. A high-dividend-yielding one is highly coveted. Stockholders are always looking for companies with a track record of consistent and incremental dividend payments.

Shares of the company have gained 66.3% compared with the Zacks Building Products - Home Builders industry’s 50.2% growth this year.

Builders are now cautiously optimistic for 2023 as a lack of existing inventory shifts demand to the new home market. Although builders continue to grapple with high construction costs and material supply chain disruptions, they continue to witness strong pent-up demand as buyers wait for interest rates to drop and turn more to the new home market due to a shortage of existing inventory.

Zacks Rank

Currently, KBH carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

PulteGroup Inc. (PHM Quick QuotePHM - Free Report) : The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes. PulteGroup presently sports a Zacks Rank #1.

The Zacks Consensus Estimate for its 2023 earnings has been upwardly revised over the past 30 days. Its earnings topped consensus estimates in three of the trailing four quarters and missed once, with the average surprise being 15.6%.

Toll Brothers (TOL Quick QuoteTOL - Free Report) : Based in Horsham, PA, this leading builder of luxury homes has gained 52.7% this year.

TOL currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 have increased to $10.61 per share from $8.66 per share in the past 60 days. The company’s earnings topped the Zacks Consensus Estimate in all the trailing four quarters, the average being 24.4%.

Lennar Corporation (LEN Quick QuoteLEN - Free Report) : The company's earnings topped the Zacks Consensus Estimate in all the trailing four quarters, the average being 18.4%.

LEN currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 have increased to $12.16 per share from $9.96 per share in the past 30 days.