Paccar Hikes Dividend 33%

| About: PACCAR Inc. (PCAR)

PACCAR Inc. (NASDAQ:PCAR) has declared a 33% rise in its quarterly dividend payment from 9 cents to 12 cents per share. The hiked dividend will be paid on December 6, 2010 to shareholders of record as of November 19, 2010. The management has asserted that the rise in dividend is mainly driven by the company’s impressive performance in the last two quarters.

In the first half of the year, the company’s profit more than tripled to $167.9 million or 46 cents per share from $52.8 million or 14 cents per share in the same period a year ago. The improved results were attributable to stronger truck sales around the world, especially with the company’s DAF nameplates, as well as a rise in Financial Services profits.

Revenues in the Truck and Other segment rose 26% to $4.21 billion in the same period due to increased freight tonnage, higher fleet utilization and increased maintenance for the aging trucks. The pre-tax profit in the segment improved significantly to $173.7 million from $20.7 million a year ago.

Despite a 3% decline in revenues to $485.7 million, pretax income in the PACCAR Financial Services (PFS) segment more than doubled to $62.1 million from $30.9 million in the first half of 2009. This was attributable to a 10% fall in interest and other expenses to $337.7 million and an improvement of 22.5% in provision for credit losses to $41.9 million in the period under study.

We believe the company’s decision to raise dividend is well supported by a significant improvement in cash flow. In the first half of the year, the company’s cash flow from operations nearly doubled to $799.5 million from $410 million in the same period of 2009, primarily driven by an improvement in profits.

PACCAR, a Zacks #3 Rank stock, has been paying dividend since 1941. Despite the global economic recession, the company did not discontinue but reduced its quarterly dividend payment from 18 cents to 9 cents in the third quarter of last year.