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Deere (DE) Rewards Shareholders With an 8% Dividend Hike

Zacks Equity Research
·4 min read

Deere & Company’s DE board hiked its quarterly cash dividend by 8%. The move reflects the company’s forecast beating second-quarter fiscal 2022 earnings performance and success in building a smart industrial strategy. Shares of the firm equipment maker have moved up 9.5% since the company reported earnings on May 20.

Deere will now pay the new quarterly cash dividend of $1.13 per share, up from the prior rate of $1.05 per share. The new quarterly dividend brings the company’s annualized dividend rate to $4.52 per share. The quarterly dividend will be paid out on Aug 8 to shareholders of record as of Jun 30, 2022. The raised dividend takes DE’s current dividend yield from 1.25% to 1.32%. The company has a payout ratio of 22%.

Over the five years, the company raised its dividend four times. Deere has a five-year average dividend yield of 1.73%, a five-year dividend growth rate of 11.3% and a five-year average payout ratio of 29.3%. The company fares well compared with its peer AGCO Corporation AGCO, which has a five-year average dividend yield of 0.83%, a five-year dividend growth rate of 7.5% and a five-year average payout ratio of 16.2%. AGCO increased its dividend four times in the past five years.

Deere recently reported second-quarter fiscal 2022 earnings of $6.81 per share, beating the Zacks Consensus Estimate of $6.65. The bottom line increased 19.9% from the prior-year quarter’s levels, driven by strong demand. Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) were $12,034 million, reflecting year-over-year growth of 9%. However, the top line fell short of the Zacks Consensus Estimate of $13,442 million, primarily due to continued supply chain challenges.  Total net sales (including financial services and others) were $13,370 million, up 11% year over year.

DE had cash and cash equivalents of $3,878 million at the end of the fiscal second quarter. Long-term borrowing was nearly $32 billion at second-quarter fiscal 2022-end. The company expects farm and construction equipment demand to be supported by positive fundamentals. Net income for fiscal 2022 is anticipated to be between $7.0 billion and $7.4 billion, up from the prior estimate of $6.7-$7.1 billion.  

The company stated that production disruptions due to supply chain constraints and inflationary pressure would continue to impact the company’s results in fiscal 2022. Strong farm fundamentals coupled with the underlying supply challenges might impair the company’s ability to meet high demand. Deere’s smart industrial strategy and Leap Ambitions are committed to aiding customers manage escalating input costs while improving their yields.

Price Performance

Deere’s shares have declined 5.3% in the past year compared with the industry’s loss of 6.4%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Deere currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company GPK and Myers Industries MYE, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.

Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.

Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.

MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.


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