Service Corporation International (SCI) experienced a notable decline in its stock price on June 15, falling 3.9% to close at $73.96, even as the company announced a series of shareholder-friendly capital allocation moves. The stock has since recovered slightly, trading around $74.82 on June 16, with an intraday range of $73.90 to $75.02, according to market data from GuruFocus.
Dividend Increase and Buyback Expansion
On June 11, SCI's board approved a significant expansion of the company's share repurchase program, adding $472 million to the existing authorization, bringing the total buyback capacity to $600 million. This includes $128 million remaining from the previous program. The company also raised its quarterly dividend by 6%, increasing the payout to $0.36 per share from $0.34. Shareholders of record as of June 15 will receive the dividend on June 30.
These moves underscore SCI's commitment to returning capital to shareholders, even as the stock faces short-term headwinds. The dividend increase marks the latest in a series of steady payout hikes, reflecting the company's confidence in its cash flow generation from its funeral, cemetery, and cremation businesses.
Financial Performance and Guidance
SCI's first-quarter results, reported earlier this year, showed a mixed picture. Revenue rose 2% year-over-year to $1.0965 billion, while GAAP diluted earnings per share slipped slightly to $0.97 from $0.98. Adjusted EPS edged up to $0.97 from $0.96, and operating cash flow improved 7% to $333.8 million. Chairman and CEO Tom Ryan noted that while funeral volumes may continue to fluctuate in the near term, they have historically been stable over the longer term.
The company reaffirmed its 2026 guidance, projecting adjusted diluted EPS between $4.05 and $4.35 and adjusted operating cash flow in the range of $1.005 billion to $1.065 billion. This outlook, combined with the capital return initiatives, provides a framework for investors to assess the company's valuation and growth prospects.
Market Context and Analyst Views
The stock's decline on the announcement day may reflect market skepticism about the sustainability of funeral volume trends, despite the positive signals from the dividend hike and buyback. An analysis by Insider Monkey highlighted SCI's strong death-care business and steady cash flow, but noted that only 25 hedge fund portfolios held the stock at the end of the first quarter, down from 30 in the previous quarter. This suggests a cautious stance among institutional investors.
Kalkine Media, in a June 16 report, emphasized that dividend growth remains a bright spot for SCI, given its consistent payout history. However, the broader market context includes concerns about valuation and potential headwinds from fluctuating funeral volumes.
As SCI navigates these dynamics, the combination of a 6% dividend increase and a $600 million buyback authorization signals management's confidence in the company's financial health and long-term outlook. Investors will be watching closely to see if these measures can offset near-term uncertainties.
