Joy Global's Shareholder Friendly Move - Analyst Blog

The board of directors of the mining equipment maker Joy Global Inc. JOY has approved of a 14% hike in the quarterly dividend rate. The new quarterly dividend of the company will be 20 cents per share, up from the previous rate of 17.5 cents. This will be paid on Jun 18 to shareholders of record as on Jun 4. Recently, diversified industrial manufacturing company Pentair Ltd. PNR raised its annual dividend by 25% to $1.20 per share from 96 cents in 2013.

The dividend yield after the latest raise will come to 1.4%, marginally lower than the industry average of 1.5%.  However, the dividend growth rate of Joy Global over the last five year is impressive.

Management is keen on increasing shareholder value. The $1 billion share repurchase authorization is a move in that direction. Joy Global has the capability to generate consistent cash flow from its activities. Hence, making arrangements for the funds required for increased dividend payment will not pose a problem. In the prior quarter the company paid $17.9 million as dividends from its free cash flow of $38.2 million.

Joy Global operates in a highly competitive industry. Despite a promising global mining outlook, the supply glut of commodities in global markets is putting downward pressure on prices and lowering demand for mining equipment. Keeping that in mind Joy Global is developing innovative new products that help to spur production from the mines and lower the operating costs of miners. Joy Global's low seam longwall system allows customers to improve the production rate by 40% and lower man power usage by 70%.

Joy Global has plans to invest $125 million in fiscal 2014 to continue to strengthen its operations. We expect Joy Global to introduce new mining equipment and techniques that will make mining simpler.

Joy Global currently has a Zacks Rank #3 (Hold). Investors interested in the mining equipment industry may consider stocks like Caterpillar Inc. CAT and Komatsu Ltd. (KMTUY). Both these stocks carry a Zacks Rank #1 ( Strong Buy).