Furnishing a home has never been so vital as it has been in the last few months, and Ethan Allen (NYSE:ETH) has led the way therein. Shares ticked up nearly 9% in yesterday's session with momentum going forward seemingly on the side of the bulls.
Ethan Allen Declares Multiple Dividends
The biggest news for Ethan Allen, and what likely sent a flood of new investment into the company, focused on it declaring two dividends. Not only did Ethan Allen declare its regular quarterly cash dividend of $0.25 per share—good for those holding shares as of May 11 with a May 25 payout date—but it also declared a separate special dividend.
The special cash dividend was three times the normal for 2021, coming in at $0.75 per share. That's good news in and of itself; special dividends are great, but it's the regularity of Ethan Allen's dividend—and the regularity of its raises therein—that should especially catch attention. Ethan Allen has been raising its dividend regularly since 2013, going from $0.09 to the current $0.25 in that time.
Ethan Allen's chairman and CEO, Farooq Kathwari, pointed to continued growth in both sales and earnings, a strong balance sheet, and the expectation of further growth to come as reasons for the special cash dividend.
What are Analysts Expecting Out of Ethan Allen?
A company with regular dividend payouts, and periodic dividend hikes, should be an attractive prospect. However, we don't see much word out of financial analysts on Ethan Allen at all. What we do see of it is noticeably positive, and bodes well for the company long-term.
The company has maintained a consensus “hold” rating for the last two years. In fact, the ratios making up that “hold” haven't changed since February 2020, just ahead of the pandemic. Back then, it had three “hold” ratings. Today, it has two, and it's had two since May 2020.
The price target, however, tells a different story. Right now, the consensus price target is $20.50 per share, with a low of $11 and a high of $30. That might be distressing, given that the stock trades at $31.29 as of this writing, but there's good news in this. That $30 high is currently held by Telsey Advisory Group...and it was issued last week. The last price target change Ethan Allen saw before that was May 2020, when Stifel Nicolaus raised from $10 to $11. The lower price targets are old, and don't really reflect what the company's done lately.
Three Reasons Why Ethan Allen May Be Your New Core Holding
Ethan Allen's gains recently were great news for those currently holding the stock, and for those considering buying in, it's enough to wonder if the gains will continue. The answer there is likely no. However, Ethan Allen does have a great potential to serve as a core holding, and here's why:
Reliability. Ethan Allen has posted a dividend regularly for nearly the last 10 years. It's also routinely increased that dividend. Reliable dividend payers aren't meant to be growth stocks, they're meant to be income stocks, and that reliability is particularly prized, especially in a turbulent market like the one we've seen for the last few years.
Accessibility. Ethan Allen share prices have been growing steadily, but slowly, for the last year. This time last year, the company was down around the $10-$12 range for closing prices, and occasionally dipped below $10 a share. In 2021, that doubled to the $20 range, and the company has been steadily gaining since. It's not explosive growth, but it's steady, and the comparatively low share prices mean that the company is accessible for even bargain-conscious investors. This isn't like scrounging up $683 to buy a share of Tesla (NASDAQ:TSLA) or nearly double that to buy Shopify (NYSE:SHOP). A share of Ethan Allen is running about what pizza for a family of four would run.
Expansion Plans. Ethan Allen has been focusing hard on building out its manufacturing capability and keeping stores well-stocked. Just under a month ago, Ethan Allen announced plans to bolster its manufacturing in North America, and also build out its number of Design Centers. CEO Kathwari noted that this was part of Ethan Allen's plan to ultimately become an “...all-in-one, whole-home custom design house.” Ethan Allen has likely front-loaded some of its income thanks to the pandemic-fueled home renovation concept, but all furniture eventually needs replacing. Ethan Allen is working to ensure those customers come back.
Looking for big growth out of home furnishing leader Ethan Allen will likely yield disappointment. However, based on what we've already seen, Ethan Allen should provide solid earnings and steady, if slow, growth. That adds up to the kind of stability and value that income investors crave, and makes Ethan Allen a great new potential core holding.
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