Nordstrom's Buyback And Special Dividend: What Should Investors Think?

• Nordstrom, Inc. JWN announced on Thursday a $4.85 per share special dividend and a $1 billion increase to its buyback program.
• Tom Forte of Brean Capital is "very encouraged" by the announcement, but maintained a Hold rating.
• According to Forte, the stock's valuation "adequately reflects" his "favorable opinion" of the company.

Nordstrom announced after Thursday's market close a special one-time dividend of $4.85 per share and a $1 billion increase to its buyback program. The company also announced the completion of its credit card receivables sale to TD Bank and will use the proceeds to fund its capital returns.

Nordstrom's repurchase authorization now stands at $1.591 billion and Thursday's announcement extends the repurchase authorization period through March 2017. The special dividend will be payable to investors on October 27.

Related Link: Nordstrom Succeeding In A Dying Brick-And-Mortar World

In a report published Friday, Brean Capital analyst Tom Forte noted that the special dividend portion of the capital return plan should "positively affect" the stock's performance on Friday, especially when considering the company couldn't have allocated all the capital devoted to just buybacks.

Forte also pointed out that Nordstrom's management didn't provide an updated guidance in its announcement, but will do so when the company reports its third quarter results on November 12. Accordingly, the analyst is not adjusting his valuation models and estimates at this time.

Finally, Forte argued that while he is "encouraged" by the capital return plan, the stock's closing price on Thursday "adequately reflects" his already "favorable opinion" of the company and its business model.

Shares remain Hold rated with no assigned price target.