Ryder System, Inc. (R) has raised its dividend to 29 cents per share from 27 cents. The increased dividend will be payable on September 16 to shareholders of the record on August 22.
Ryder has remained committed to its shareholders for the past 35 years through dividend payments. The recent payment marks the company’s 140th successive quarterly cash dividend.
Further, the company maintains a leverage ratio (debt to equity) of 202%, which remains unchanged from year-end 2010. This ensures consistency in shareholder returns through dividend payments and share buybacks at regular intervals.
We believe that the increased shareholder return highlights Ryder’s strong financial performance over the years backed by solid volume, revenue and earnings growth. The company remains focused on generating stellar results by expanding its footprint through organic growth and key acquisitions.
The company continues to benefit from its increased revenue generating capacity owing to growing demand for used vehicles and higher commercial rental services. Through acquisitions, Ryder has significantly expanded and tapped new business opportunities. In this regard, the company acquired Hill Hire PLC, subsidiary of Lloyds Banking Group (LYG), last month and inherited a strong foothold in contractual businesses in the U.K.
We believe all these growth factors will eventually lead to a healthy balance sheet for Ryder with strong cash flows. This will not only entail increased returns to investors but also fortify the company’s growth plans as evident by its investment of $1.75 billion in 2011 toward expansion of transportation fleet.
Consequently, we recommend our long-term Outperform rating on Ryder System supported by a Zacks #2 (Buy) Rank.