05-03-2015, 06:36 PM
(05-03-2015, 05:08 PM)Kerim Wrote: And despite that, the payout ratio is still very comfortably around 30 percent. They've been able to do this by growing earnings at a steady clip.
Also share count has reduced from 181MM to 148MM over the last 10 years. From the latest earnings call:
Quote:We’ve been active with our share repurchase program following our October announcement of our new authorization of the repurchase of $2 billion to $3 billion in shares in over two years. We remain committed to completing the share repurchase plan within that time period. To that end, we repurchased $477 million worth of Parker shares in the quarter, which brings our total for the fiscal year to-date to $1.3 billion.
Quote:And on the topic of share repurchase as communicated during last quarter’s earning call we remain committed to the $2 billion to $3 billion share repurchase announced in October. To-date share repurchases spent totaled 67% of the low end of the announced repurchase program and we anticipate that the balance of the commitment for repurchase will be made discretionarily over the remaining 18 months.
Quote:So that being said, the ideal mix would be we would do $2 billion approximately of the share repurchase in the billion of acquisitions over that time period that we announced. But if the acquisitions do not materialize then we will make up the difference with a share repurchase.
Quote:Joel Tiss - BMO Capital Markets
And is it safe to assume that there is nothing really big in the acquisition pipeline, or else you guys would balance the share repurchase and the acquisitions a little more?
Thomas Williams - Chief Executive Officer
Joel, it’s Tom again. The pipeline is getting more active, and - I’ll probably never be happy with the volume there, but it is getting more active, so I’m pleased with that. Our sweet spot will continue to be in the $30 million to $300 million revenue range. That being said, we are a big company. We could do a bigger acquisition, but I think you will see us - the majority of activity is going to be in our traditional wheelhouse as far as revenue size.
So if there were no acquisitions and the full $3B was utilized for repurchases the float could be reduced by another 14.1MM shares using Friday's close of $120.70. This would reduce the dividend payments by about $35.5MM a year using the current dividend yield.
If they only use the $700MM left on the low end of $2B in repurchases they'd still retire about 5.8MM shares. This would reduce yearly dividend payments by $14.6MM using the current dividend yield.
The repurchases effectively reduces float between 4-10% in the forward 18 month period. This also lowers payout ratio / increases EPS by 4-10%.
EPS is $7.37 this year and estimated to be $8.13 next year. Not sure if analyst EPS projections have the repurchases baked in. I'm sure they do. $7.37 * 1.1 ( accounting for the full $3B in repurchases ) puts EPS at $8.11.
Debt to equity stands at 0.5
Payout ratio has increased from 15% in 2005 to 28% currently.
Constant share repurchases has allowed PH to increase their dividends per share by 4.58X in the last 10 years but actually only have to pay out 3.17X more cash.