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Carnival Ups Dividend by 14%, Extends Share Buyback Program

Carnival Corporation’s CCL board of directors approved a 14% hike in the company’s quarterly dividend. The revised quarterly dividend now comes in at 40 cents per share compared with the previous figure of 35 cents. The dividend will be paid on Jun 16, 2017, to shareholders on record as of May 26.

The new payout amounts to an annual dividend of $1.60 per share and represents a yield of 2.7%.

Strong balance sheet and cash flows provide Carnival the financial flexibility to offer dividend hikes. In the recently concluded fiscal first quarter, Carnival paid $254 million in cash dividends to stockholders. In the quarter, the company generated cash from operations of $932 million, representing an increase of nearly 17% over prior-year quarter. Cash and cash equivalents as of Feb 28, 2017, were $437 million.

Concurrently, the board authorized the company to repurchase up to $1 billion worth of shares. Repurchases may be made through both public market as well as private transactions and are subject to prevailing market conditions and other considerations. Since resuming the share repurchase program in late 2015, the company has repurchased more than 56 million shares valued at $2.7 billion.

Notably, the new share repurchase authorization and dividend hike further depicts the company’s efforts to enhance shareholders’ value.

Meanwhile, Carnival believes that it is well positioned for continued earnings growth, given the current strength in its bookings along with pricing trends for the year. Cost-containment efforts like lower fuel consumption should also aid profits. Going ahead, the company’s planned launch of new ships, its strategy to tap into the fast-growing Asian markets along with initiatives to drive revenue yields are expected to be beneficial.

Over the last six months, shares of Carnival have rallied 25.1% while the Zacks categorized Leisure and Recreation Services industry registered an increase of 21.1%. Going forward, share buyback is expected to benefit the company’s earnings per share, book value as well as shareholder equity due to reduction in the number of shares outstanding.

Zacks Rank & Stocks to Consider

Currently, Carnival carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include:

The Marcus Corp. MCS sporting a Zacks Rank #1. Its long-term growth estimate stands at 15% while the industry’s average is 12.5%.

Vail Resorts, Inc. MTN carries a Zacks Rank #2 (Buy). Its current year and next year earnings estimates have moved up 4.6% and 5.8%, respectively, in the past two months.

Reading International, Inc. RDI is another Zacks Rank #2 company whose current year and next year earnings estimates have moved up 12.2% and 22.6%, respectively, in the past month.

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