Thor Industries (THO) Disappointing Dividend Increase

11 Oct 2018 23:25
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Last April I posted a blog post “Expect More from Thor” and a lot has changed since that time. Tariffs and declining orders weighed on stock price and just when debt is eliminated they announce a major acquisition of the Erwin Hymer Group.

During this time period THO’s fiscal year ended in July and September reported full year EPS at $8.14 and at that point the dividend payout ratio was a humble 18%. The run-up in earnings over the last two years and the move to payoff long term debt created a high expectation by this shareholder that THO would reward shareholders with a significant dividend raise. Instead today THO announced just a 5.4% dividend increase from an annual dividend of $1.48 to $1.56 which moved their payout ratio up to 19.16%.

In my opinion this was either an outright insult to shareholders or there are more issues to the Erwin Hymer Group that management is not sharing. Either way management is not demonstrating a shareholder friendly team that they claim to be. I have held THO in my account since 2014 but this patient investor is patient no more, time to sell.

Finally as a follow-up to my April post, their 2018 inventory turn rate dropped to a factor of 12.77. A mild improvement that confirmed their backlog reduction was not from improving operations but declining sales. Guess that $110M investment in capital expenditures was a questionable decision.

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