Valmont Announces Capital Allocation Plan - Analyst Blog

Valmont Industries VMI announced that its Board of Directors has adopted a capital allocation plan. The directors listed a number of priorities for Valmont's capital so that they can balance between returning excess capital to shareholders and maintaining sufficient financial capital to fund continued growth, both organically and through acquisitions.

The Directors approved capital expenditures of about $340 million for the period of 2014 to 2016. They stated that investment in working capital is necessary for future sales growth. They also approved dividends on common shares in the range of 15% of the prior year's fully diluted net earnings.

The Directors also authorized Valmont to repurchase up to $500 million of its outstanding shares, from time to time over the next twelve months at prevailing market prices, through open market or privately-negotiated transactions. The buybacks will be funded from available working capital and short-term borrowings, subject to market and economic conditions. However, the company is not compelled to make any purchases and may discontinue the program at any time.

Further, the Directors approved a 50% hike in quarterly cash dividend to 37.5 cents per share payable on Jul 15, 2014, to shareholders of record as of Jun 27, 2014.

Valmont aims at maintaining a Moody's Corp. MCO Baa2 and a Standard and Poor's BBB debt rating, with lower debt ratings of Baa3 and BBB- being reserved for special opportunities.

Valmont, which is among the prominent steel-pipe and tube companies along with MRC Global Inc. MRC and Mueller Water Products, Inc. MWA, retain a Zacks Rank #3 (Hold).