Deere announces quarterly dividend
Deere announced the key dates of its fourth-quarter dividend in a press release on August 29. To be eligible for this dividend, investors must hold Deere stock as of September 28. Deere is expected to pay dividends on November 1. Deere’s fiscal year is from November 1 to October 31.
Deere has declared a dividend of $0.69 per share, which is an increase of 15% compared to last year. At the end of Deere’s fiscal Q3 2018, there were 328 million outstanding shares. Based on the assumption that Deere will not buy back any shares until its record date, Deere will be spending ~$226.32 on the dividend payment.
Free cash flows
Generally, the dividends are paid out of free cash flows. In the past five years, DE has managed to generate positive free cash flows for four years, but in its fiscal 2017, it generated negative free cash flows. The trend has continued in 2018 as well. At the end of its fiscal Q3 2018, DE had a negative free cash flow of ~$2.6 billion. However, the five-year average free cash flow stands at $620 million. DE’s dividend payment out of free cash flows has been over 87%, and if we take the average of five years, it exceeds the free cash flow generated. DE needs to increase its free cash flows to continue its strong dividend payments.
Investors can indirectly hold Deere by investing in the iShares MSCI Global Agriculture Producers ETF (VEGI), which has invested 14% of its portfolio in Deere as of September 24.