Why argan stock fell 6%

Power plant construction company shares Argan (AGX 6.95%) hit a 52-week high earlier this month after the company reported strong sales and earnings growth in its fiscal second quarter. Shares are up again Thursday afternoon, up 6.6% by 12:10 PM ET, for an entirely different reason.

Argan increases its dividend.

How much is Argan’s dividend?

Argan has never been a particularly generous dividend payer. At $0.30 per share, paid quarterly and priced at $94, the stock was paying a dividend yield of just 1.3% just yesterday. But with business booming now, it seems Argan has decided to be a little looser with his money.

On Oct. 31, the company plans to increase its dividend payment by 25% to $0.375 per share per quarter, or $1.50 per year.

Is Argan Stock a Buy?

That’s a big percentage increase for Argan. But the company says it can afford to because of the “growing pipeline of opportunities we’re seeing as the energy industry mobilizes to build traditional gas-fired and renewable facilities needed to meet the anticipated growth in data center energy demand , increased production activity and electric vehicle charging.”

The resulting 1.6% dividend yield means Argan will finally pay more dividends than average S&P 500 stock, which according to Morningstar data pays just under 1.5%. But the dividend alone isn’t the only reason you should like Argan.

Cash is flowing freely at the construction company, which generated positive free cash flow of $169 million over the past 12 months. This gives the stock a low price-to-free cash flow ratio of 7. Combined with an expected earnings growth rate of 10%, I’d say this makes Argan not just a decent dividend stock — but a quite high value. also stock.