Commercial Metals Announces $350M Share Buyback, Hikes Dividend by 17%

Commercial Metals Company (CMC), a manufacturer and recycler of steel and metal products, announced that its Board of Directors has authorized a new share buyback program of $350 million. The new plan replaces the existing program, which has $27 million remaining. Following the news, shares popped 3.2% before closing the day flat at $32.49 on Wednesday.

The Board also increased its quarterly cash dividend by $0.02 to $0.14 per common share, to be paid on November 10 to shareholders of record as of October 27. The new quarterly dividend implies an annualized common share dividend of $0.56 per share, reflecting a dividend yield of 1.7%.

The move reflects the company’s continued belief in driving shareholder returns higher through a well-balanced capital allocation strategy. (See Insiders’ Hot Stocks on TipRanks)

Commenting on the news, Barbara R. Smith, Chairman of the Board, President, and CEO of CMC, said, “This action was made possible by the strategic transformation carried out over the last several years, which has greatly enhanced our Company’s earnings capability and cash flow profile. Looking ahead, we believe CMC is well-positioned to achieve our key strategic goals of identifying, funding and executing on attractive growth opportunities, maintaining strong returns over the economic cycle, and providing shareholders with attractive cash returns, while maintaining a high-quality balance sheet.”

Recently, Goldman Sachs analyst Emily Chieng upgraded the stock to Hold from Sell and lifted the price target to $33 (1.6% upside potential) from $31.

Chieng believes that hot-rolled coil steel prices are set to hit a “negative inflection” point, with CMC’s long products exposure set to benefit from a fall in steel prices. Furthermore, he sees CMC as a major beneficiary of a potential infrastructure bill.

Overall, the stock has a Hold consensus rating based on 2 Holds. The average Commercial Metals price target of $34.50 implies 6.2% upside potential to current levels. Shares have gained 41.7% over the past year.