Fortune Brands' New Share Buyback - Analyst Blog

Fortune Brands Home & Security, Inc. FBHS, the provider of home and security products, yesterday announced the authorization of a new share repurchase program by the company's board of directors, which reflects the company's sound financial position and favorable prospects.

This new share repurchase authorization, which is valid till Jun 2, 2016, permits FBHS to buyback a maximum of $250 million of its outstanding shares. This is in addition to the current $50 million share repurchase authorization remaining under the $150 million share buyback program announced on Feb 25, 2014.

In the first quarter of 2014, FBHS purchased $68.7 million worth of its common stock. Year-to-date, the company bought back over $190 million worth of its common shares.

The company has a consistent track record of returning cash to shareholders through share repurchase and dividend payouts. Prior to the share buyback announcement in February 2014, the company's board hiked its quarterly dividend by 20% to 12 cents per share on Dec 10, 2014, thereby bringing the annual dividend to 48 cents.

This Zacks Rank #3 (Hold) company has consistently paid dividend for the last five quarters. It got publicly listed in Sep 2011 after its parent company Fortune Brands Inc. spun off its businesses into three standalone units, giving investors pure plays in golf, home products and alcoholic drinks. The radical separation has been the outcome of four years of strategic evaluation conducted by Fortune Brands' board and management.

The company's strategy of paying regular dividend and increasing the same at feasible intervals reflects its commitment to enhance long-term value for shareholders. Through this, FBHS also demonstrates its ability to boost earnings and cash flows in the long run.

Dividend hikes and share repurchase programs are frequent among companies with a stable cash position and healthy cash flow. Apart from FBHS, Avis Budget Group Inc. CAR, ProAssurance Corp. PRA and Urban Outfitters Inc. URBN authorized new share buyback programs in the recent past.

We believe that share repurchases and dividend payments not only enhance shareholder return but raise the stock's market value as well. Looking ahead, FBHS remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks.