KB Home Announces New $1 Billion Share Repurchase Authorization and Increase in Quarterly Dividend

Rhea-AI Summary

KB Home (NYSE: KBH) announced a new $1 billion share repurchase authorization and a 25% increase in its quarterly cash dividend to $.25 per share. The Board of Directors aims to continue share repurchases in 2024 between $200 million and $400 million, with $50 million already completed in the first quarter. The annualized dividend is now $1.00 per share, with a yield of approximately 1.6%.

Insights

Financial Analyst

The announcement by KB Home of a new $1 billion share repurchase authorization, alongside an increase in its quarterly dividend by 25%, reflects a strong liquidity position and a confident outlook by the company's management. Share buybacks are often a signal that a company's leaders believe the stock is undervalued and represent a method of returning value to shareholders, as repurchasing shares can help boost the earnings per share (EPS) metric by reducing the number of shares outstanding.

Increasing the dividend is a tangible reward to investors and could attract income-focused shareholders. The increase to $0.25 per share raises the annualized dividend to $1.00, yielding approximately 1.6% based on the recent closing price. This aligns with the company's historical yield targets and indicates a sustainable dividend policy, considering historical and projected cash flows.

For retail investors, these actions imply a shareholder-friendly capital allocation policy, but it's also important to keep an eye on the company's future earnings and the housing market, as these will determine the actual sustainability of these financial decisions. Furthermore, investors should consider the opportunity cost, as the funds used for share repurchases might alternatively be invested in growth opportunities or debt reduction.

Market Analyst

The strategic move by KB Home occurs in an environment where housing market dynamics are evolving. Historical patterns show that housing stocks can be sensitive to interest rate changes, economic cycles and consumer confidence. The decision to buy back shares and increase dividends could be interpreted as a message of resilience in the face of these factors.

It's important for investors to contextualize these financial decisions within the larger housing market trends. Currently, market indicators such as mortgage rates, housing starts and inventories can also provide valuable clues about the potential performance of housing stocks like KB Home. A disciplined approach to share buybacks and dividend increases suggests that the company is managing its capital efficiently, but investors should also consider the broader economic indicators that can impact the housing industry.

From the perspective of retail investors, it's critical to assess whether the company's optimistic capital return program is backed by a robust fundamental outlook for the industry and the company's competitive position within it. Long-term investors may appreciate the increase in cash returns, but it's also essential to look at the company's ability to sustain growth in a changing economic landscape.

Company Raises Quarterly Cash Dividend 25% to $.25 per Share

LOS ANGELES--(BUSINESS WIRE)-- KB Home (NYSE: KBH) today announced that its Board of Directors authorized the repurchase of up to $1.00 billion of the Company’s outstanding common stock, replacing a prior authorization, which had $113.6 million remaining. The Company intends to continue its share repurchases in 2024 in a projected range of between $200 million and $400 million for the full year, including $50 million of share repurchases completed during the Company’s 2024 first quarter.

The Company’s Board also approved an increase in the quarterly cash dividend on the Company’s common stock to $.25 per share from $.20 per share. This 25% increase results in an annualized dividend of $1.00 per share, representing a yield of approximately 1.6%, based on the closing price of KB Home’s common stock on April 17, 2024. The yield is in-line with the Company’s long-standing target of about 1.5%. Together with the increase the Board authorized in July 2023, the Company has raised its quarterly dividend by 67% in the past nine months.

In addition, the Company’s Board of Directors declared a quarterly cash dividend, at the $.25 per share rate, which will be payable on ­May 23, 2024, to stockholders of record on May 9, 2024.

“With a strong balance sheet and confidence in our ability to generate a significant level of operating cash flow as we continue to evolve into a larger and more profitable company, we are committed to our balanced approach of investing in our growth while simultaneously returning a meaningful level of cash to stockholders,” said Jeffrey Mezger, Chairman and Chief Executive Officer. “Today’s actions by our Board of Directors underscore our commitment to long-term value creation.”

About KB Home

KB Home is one of the largest and most trusted homebuilders in the United States. We operate in 47 markets, have built over 680,000 quality homes in our more than 65-year history, and are honored to be the #1 customer-ranked national homebuilder based on third-party buyer surveys. What sets KB Home apart is building strong, personal relationships with every customer and creating an exceptional homebuying experience that offers our homebuyers the ability to personalize their home based on what they value at a price they can afford. As the industry leader in sustainability, KB Home has achieved one of the highest residential energy-efficiency ratings and delivered more ENERGY STAR® certified homes than any other builder, helping to lower the total cost of homeownership. For more information, visit kbhome.com.

Forward-Looking and Cautionary Statements

Certain matters discussed in this press release, including any statements that are predictive in nature or concern future market and economic conditions, business and prospects, our future financial and operational performance, or our future actions and their expected results are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and projections about future events and are not guarantees of future performance. We do not have a specific policy or intent of updating or revising forward-looking statements. If we update or revise any such statement(s), no assumption should be made that we will further update or revise that statement(s) or update or revise any other such statement(s). Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The most important risk factors that could cause our actual performance and future events and actions, including the amount of our common stock we may repurchase under the new Board of Directors’ authorization, to differ materially from such forward-looking statements include, but are not limited to the following: general economic, employment and business conditions; conditions in the capital, credit and financial markets; our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve has increased sharply over the past two years and may further increase to moderate inflation, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; our compliance with the terms of our revolving credit facility and our senior unsecured term loan; the ability or willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under our revolving credit facility or unsecured letter of credit facility; volatility in the market price of our common stock; weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; competition from other sellers of new and resale homes; our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets and in entering into new markets; our ability to generate orders and convert our backlog of orders to home deliveries, cash flow and revenues, particularly in key markets in California; our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this release or in any of our other public filings, presentations or disclosures; and other events outside of our control. Additionally, specifically as to common stock repurchases, their pace, volume and timing is expected to be based on considerations of, among other things, our cash flow, liquidity outlook, land investment opportunities and needs, the market price of our shares, and the housing market and general economic environment. Please see our periodic reports and other filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to our business.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240418580138/en/

Jill Peters, Investor Relations Contact

(310) 893-7456 or

investorrelations@kbhome.com

Source: KB Home

FAQ

What new announcements did KB Home make regarding its stock?

KB Home announced a new $1 billion share repurchase authorization and a 25% increase in its quarterly cash dividend to $.25 per share.

What is the projected range for share repurchases by KB Home in 2024?

KB Home intends to continue share repurchases in 2024 in a projected range of between $200 million and $400 million for the full year.

What is the new quarterly cash dividend amount for KB Home's common stock?

The quarterly cash dividend on KB Home's common stock has been increased to $.25 per share from $.20 per share.

What is the yield of KB Home's common stock based on the new dividend amount?

The annualized dividend of $1.00 per share results in a yield of approximately 1.6% based on the closing price of KB Home's common stock on April 17, 2024.