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Lincoln Electric Holdings Inc. (LECO) maintained its trend of raising its dividend annually, by announcing a 17.6% (3 cents) hike in its quarterly dividend to 20 cents from the prior dividend of 17 cents.
The increased dividend will be paid on December 28, 2012, to stockholders of record on December 17, 2012. The company has preponed the dividend payment from January 2013 to December 2012, given the uncertainty of tax increases on dividends in 2013.
The last dividend hike was declared a year back in November 2011, which marked a 9.7% increment to reach 17 cents. In the span of 1995 to 2010, Lincoln Electric’s current dividend has increased eight fold from 2.50 cents in 1995.
Lincoln Electric’s nearest peer, Illinois Tool Works Inc. (ITW), had upped its dividend by 6% to 38 cents in August 2012. Lincoln Electric’s dividend payout ratio of 22% is less than Illinois Tool Works’ 35%. Lincoln Electric’s cash position, as of September 30, 2010, of $340.7 million was lower than Illinois Tool Works’ $2,054 million.
Lincoln Electric, however, enjoys a much lower debt-to-capital ratio of 1.6% compared to Illinois Tool Works’ 49%. We believe this puts Lincoln Electric in an advantageous position enabling it to focus on growth opportunities and increasing shareholder value, rather than on repaying debt.
Lincoln Electric delivered adjusted earnings per share (EPS) of 80 cents in the third quarter, 21% higher than the year-ago quarter’s EPS of 66 cents. Total revenue, however, inched down 0.6% year over year to $697.6 million, missing the Zacks Consensus Estimate of $730 million.
Lincoln Electric’s is focusing on pursuing new acquisitions, introducing new products as well as increasing its footprint in the global arena. However, weak global economic condition will be headwind moving ahead. Moreover, slow growth rates in the North America welding segment is an added concern. We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
Cleveland, Ohio-based Lincoln Electric designs, develops and manufactures arc welding products, robotic arc-welding systems, plasma and oxyfuel cutting equipment and commands a leading position in the brazing and soldering alloys market.