American Eagle shares rise as special dividend set

AP News
Posted: Sep 12, 2012 12:56 PM

NEW YORK (AP) — Shares of American Eagle Outfitters climbed to their highest point in more than four and a half years on Wednesday after the teen-oriented retailer declared a special cash dividend.

THE SPARK: Before the market opened, American Eagle announced a special cash dividend of $1.50 per share and a regular quarterly dividend of 11 cents per share.

THE ANALYSIS: Margaret Whitfield of Sterne, Agee & Leach said in a client note that American Eagle said last week that its strategy includes delivering top-tier shareholder returns. The analyst says that the special dividend is "clearly a step in that direction."

Whitfield said it is possible the retailer will have more special dividends and buybacks in the future, as it works on improving its revenue and margins, increases the number of outlet stores and closely manages inventory.

She maintained a "Buy" rating and $27 price target.

Jefferies analyst Randal Konik also kept a "Buy" rating, with a $26 price target. He called the special dividend "a positive development because it underscores the strength of American Eagle's fundamental business and balance sheet."

There are several catalysts that could send the stock higher in the second half, h said, but with the shares already up by 50 percent since the start of the year, he expects growth to moderate.

SHARE ACTION: American Eagle Outfitters Inc.'s stock added 80 cents, or 3.5 percent, to $23.51 in midday trading. Earlier in the session, the shares hit $23.70, their highest level since January 2008.