Sturm, Ruger Trades Higher After Announcing Special Dividend
The Board of Directors of Sturm, Ruger & Company, Inc. (NYSE: RGR) announced Monday that the company will be paying a special dividend of $4.50 per share on all issued and outstanding shares of common stock. This special dividend will be paid out on December 21, 2012, to all shareholders on file as of December 7.
The payout will cost the company about $86.2 million. This comes after third quarter earnings showing 62% growth, and sales figures that grew 47%.
Commenting on the decision to pay out this special dividend, Chief Executive Officer Michael O. Fifer said:
“The decision to return this cash to our shareholders was based on an analysis that indicates we can continue to fund our high rate of organic growth, including expected increases in both working capital and capital expenditures, and fund our quarterly dividend while still growing our cash reserves at a modest rate. In addition, the special dividend will substantially increase the Company's return on our shareholders' equity, as the equity will now more accurately reflect the net assets being used in the conduct of the business. Likewise, after the special dividend, our long-term investors will still own the same future stream of earnings, resulting in an increase to their return on investment.”
Mr. Fifer went on to say that the special dividend represents a positive outlook on new product development and future plans to expand manufacturing operations.
Sturm, Ruger traded up four per cent yesterday following the news of the special dividend. This announcement came after a trading session in which the company had already gained 1.5 per cent. The company has grown 46 per cent since the start of the year, with no break in the action after Monday's latest.
With the dividend, Strum, Ruger becomes yet another company in a fairly long list to recently declare a special dividend. Within the last few weeks, Wynn Resorts (NASDAQ: WYNN), Tyson Foods (NYSE: TSN), Carnival Corp (NYSE: CCL) and IDT (NYSE: IDT) all announced plans to pay a special dividend before the end of the year. Walmart (NYSE: WMT) said it would move the date of its dividend up -- from January to the end of December.
Why the trend? With the fiscal cliff looming, it is possible that taxes on dividends could go up significantly prior to the start of 2013. Companies may opt to pay out excess cash now, shielding the money from higher future tax rates.
Firearms competitor Smith & Wesson (NYSE: SWHC) has also made impressive gains in 2012, including the report of more than a million dollars in sales above estimates. In the wake of Sturm, Ruger's announcement yesterday, however, Smith & Wesson traded down one per cent despite their positive guidance.
Not only has the special dividend announcement made an impact, but it comes on the heels of earning a top industry award, which likely had an effect on trading of the two companies Monday. According to a press release, last week Sturm, Ruger earned the Firearms Manufacturer of the Year award, which was given to the company at the 39th annual meeting of the National Association of Sporting Goods Wholesalers. This is the sixth consecutive year in which Sturm, Ruger has won the award.
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