Eaton's Buybacks Are a Better Deal Than You Might Think for Dividend Investors

Globally diversified industrial giant Eaton Corp. (NYSE:ETN) has been doing a great job of turning revenue into cash flow lately. It's been using that money to reward investors with dividend increases and large share repurchases. But to understand how big this news really is for dividend investors takes a little bit of digging. Here's what you need to understand to see just how great the stock buybacks have been for income investors.

Ultimately, Eaton's use of cash has proven that management cares greatly about its shareholders. Some might argue that stock buybacks aren't the best use of cash. A sizable bolt-on acquisition that spurs long-term growth would obviously be a better option. But just because you have cash doesn't mean you'll find a worthwhile opportunity. Until Eaton finds something big to invest in, sizable stock buybacks, and the hidden dividend benefit they afford, should make most income investors pretty happy.

Source: Motley Fool


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