Best Buy Company Inc
. (
BBY
), the leading specialty retailer of consumer electronic products,
has increased its quarterly dividend to 17 cents per share,
bringing its annualized dividend payout to 68 cents. This
also marks the company's third consecutive dividend increase in the
past three years.
The new dividend rate reflects a 6% growth over the previous
quarterly dividend of 16 cents per share (annualized 64 cents per
share). As per the company, the increased dividend will be paid on
October 2, 2012 to shareholders of record as of September 11, 2012.
Based on the new payout and the closing market price as of June 21,
2012, the dividend yield came in at approximately 3.5%.
The move was quite necessary to boost investor confidence on the
stock as the company has been struggling with sales declines in key
categories including televisions, notebooks, digital imaging and
gaming devices, which in turn, is taking a toll on its same-store
sales results.
Moreover, Best Buy's Founder and Chairman of the Board and the
largest stakeholder of the company, Richard Schulze, stepped down
after serving for almost four decades.
Speculation is rife that Schulze along with some private equity
players might take over the company, as he is exploring options for
his 20.1% ownership stake in the company.
However, amid this gloom, Best Buy announced a string of
strategic measures to boost its top-line growth and generate
long-term profitability. With its multi-channel strategy, the
company intends to enhance its store formats while increasing its
global footprint. Best Buy, through its cost reduction program,
intends to generate $800 million in cost savings by fiscal 2015,
including $250 million in fiscal 2013.
During the recently concluded quarter, Best Buy had $379 million
in cash from operations. The company bought back approximately 4.6
million shares for $115 million at $25.07 per share and paid a
quarterly dividend of 16 cents per share, aggregating $55
million.
Currently, we have a long-term Neutral recommendation on the
stock. Moreover, Best Buy, which faces competition from
Wal-Mart Stores Inc
. (
WMT
), holds a Zacks #3 Rank that translates into a short-term Hold
rating.
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