Deere Lifts Dividend, Plows $5B Into Buyback

SAN FRANCISCO (Dow Jones) -- Deere & Co., basking in the glow of strong earnings from booming agricultural demand, said Wednesday it will hike its quarterly dividend by 12% and repurchase $5 billion of its own stock.

The company also said it plans to spend $35 million to increase its production of combine harvesters by about 30%.

Investors liked the news, pushing up Deere's (DE) share price by as much as 3.6%, or $2.87, to $82.73.

Deere's shares have risen sharply with the agricultural boom. As the price-per-bushel of corn has more than doubled since 2006, so have Deere's shares, which then sat in the mid-$30 range.

The company's shares have vaulted from a yearly low of $45.28 in January 2007 to the mid-to-low $80 range this May.

Deere said it expects to complete its combine manufacturing expansion by 2009.

The dividend payment will be 28 cents a share, up 3 cents a share from the previous level, payable Aug. 1 for shareholders of record on June 30.

"[The announcements] reflect our continuing confidence in the company's future direction and its ability to generate the cash flow to fund future growth opportunities while also returning cash directly to shareholders," said Chairman and CEO Robert Lane in a statement.

The buyback program comes on top of an existing 40 million-share buyback the company announced in May 2007. As of April 30, Deere still had about 23 million shares remaining to complete that first buyback. The company had about 430 million shares outstanding on April 30.

In its quarterly earnings report released two weeks ago, Deere said it had seen a 34% increase in its agricultural equipment sales. The company said it expects overall sales to increase by about 20% for the fiscal third quarter, which ends July 31, and agricultural equipment sales to jump by 35% for full-year 2008.

In the second-quarter statement, the company said net sales and revenues were up 18% and its earnings per share climbed 28% to $1.74 a share.

The Moline, Ill.-based company produces products for agriculture, forestry, construction and landscaping.