It’s Raining Rewards for KB Home’s Stakeholders

KB Home (NYSE: KBH) has announced twin rewards for its shareholders — a new $300 million share buyback program and quarterly dividend payments. The company’s board of directors had approved these rewards on April 7.

Shares of KB Home rose 1.4% to close at $31.45 on Monday.

KB Home is a renowned home building company, which has operations in North Carolina, Arizona, Texas, and other U.S. states. It is headquartered in Los Angeles, CA.

Inside the Headlines

As noted by the company, the new stock repurchase program has replaced the company’s previous authorization. At the end of February 2022, the company was left to buy back 331,400 shares under the program, which now stands annulled.

KB Home also mentioned that the buybacks under the new program can be accomplished through open market or private transactions. The management has to decide the amount and timing of shares to be repurchased. All these decisions will be dependent on the market conditions and other factors.

Meanwhile, the company announced that a quarterly dividend of $0.15 per share will be paid on May 19. This payment, for the second quarter of 2022, will be made to all shareholders who are in the company’s record as of May 5.

Shareholder-Friendly Policy

In Fiscal 2021 (ended November 30), KB Home repurchased shares worth $188.2 million. Dividend distributions amounted to $54.1 million, higher than $38.1 million in the previous year.

In the first quarter of Fiscal 2022 (ended February 28, 2022), the company refrained from repurchasing any shares while distributing dividends of $14.1 million.

Such disbursements by KB Home are in line with the company’s policy of rewarding shareholders handsomely. Exiting the first quarter, the company’s cash and cash equivalents stood at $240.7 million.     

Analysts’ Take

A week ago, Daniel Oppenheim, an analyst at Credit Suisse, started coverage on KB Home with a Buy rating and a price target of $42 (33.55% upside potential).

The analyst expects KB Homes to “generate an ROE of 26% in 2022 and 2023, driven by the continuation of healthy demand trends that should support strong volume and margins.”

Overall, the Street is cautiously optimistic about KB Home’s growth prospects. The stock presently has a Moderate Buy consensus rating based on 11 Buys, two Holds, and one Sell. KB Home’s average price forecast of $53.75 suggests 70.91% upside potential from current levels. Over the past year, shares of the company have declined 35.9%.

News Sentiments

Per the TipRanks tool, News Sentiment is currently Positive for KB Home based on five articles in the past seven days. 100% of the articles on KBH have a Bullish sentiment, compared to the sector average of 62%.

Conclusion

Rewards in the form of dividends and share buybacks are likely to keep investors interested in KB Home.

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