Analysts have also opined that the altruistic considerations could have played a major role in the decision of the board to split the stock.
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With its stock price trading near all-time highs, the Kroger Co.is introducing three new ways to keep the rally rolling: A 13.5 percent dividend increase, a $500 million stock buyback and a two-for-one split of Kroger shares.
Kroger posted better-than-expected earnings in the first quarter of 2015 and, according to The Wall Street Journal, “has been taking a bigger share of the food-retail market, which has broadened in recent years to encompass big-box giants like Wal-Mart Stores Inc. and dollar stores”.
For the first time since 1999 and just the fifth time in company history, Kroger announced a two-for-one stock split June 25 at its annual shareholders meeting in Cincinnati. The split will increase to 962 million the number of shares outstanding. Effectively, after the split, the dividend will be halved to $0.105 per share.
In the statement, CEO Rodney McMullen said, “today’s actions reflect our Board of Directors’ confidence in Kroger’s long-term performance and ability to deliver growth consistently to our investors”.
“The stock split will increase the accessibility of our shares and liquidity in the trading of our shares”, he told shareholders. The company noted that it doesn’t expect to make any purchases under this plan for the remainder of 2015. The company has made $11.7 billion in share repurchases since the start of 2000. “We remain committed to delivering value to shareholders”.
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Kroger, with a market capitalization of $35.53 billion, traded recently at $73.77, up 1.1 percent. “We are especially excited that the stock split will make Kroger’s common shares more accessible to all of our associates”, McMullen continued.
