Family Dollar Stores Inc.
), the operator of self-service retail discount store chains,
recently announced a dividend hike and an additional share
buyback program. Thus, revealing its plan to utilize its free
cash to boost stakeholders' return.
The Matthews, N.C. - based company, raised its quarterly
dividend by 23.8% to 26 cents (or $1.04 annually) from 21 cents a
share (or 84 cents annually). The company announced that the
increased dividend will be effective from the next quarterly
Since the inception of the dividend program in 1976, the
company has raised its dividend every year, this being the 37th
successive hike. Family Dollar's commitment towards increasing
shareholders' return reflects its free cash flow generating
capability, sound liquidity position and defined future
However, the news did not provide impetus to the stock, as the
share price of Family Dollar dropped 0.5% or 31 cents to close at
$58.04 on Thursday. The dividend yield based on the new payout
and the last closing market price is 1.8%.
In January 2012, Family Dollar last hiked its dividend to 21
cents from 18 cents a share, reflecting an increase of 16.7%.
Dividend hikes not only enhance shareholder's return but raise
the market value of the stock. Through this strategy, the
companies bolster investor confidence on the stock, thereby
persuading them to either buy or hold the scrip instead of
selling them. Looking ahead, the company remains confident of its
growth potential, suggesting enhanced value for shareholders via
dividend payout as well as share buybacks.
Apart from the dividend increase, Family Dollar enhanced its
existing share repurchase authorization of $94 million by $300
million, and stated that the repurchases would be made through
cash generated from operating activities.
Earlier this month, Family Dollar posted lower-than-expected
first-quarter fiscal 2013 results. The quarterly earnings of 69
cents a share missed the Zacks Consensus Estimate of 74 cents but
inched up 1.5% from 68 cents earned in the prior-year quarter.
Management also trimmed its fiscal 2013 earnings outlook to a
range of $3.95 to $4.20 per share, down from a band of $4.10 to
$4.40, forecasted earlier.
Family Dollar, which competes with
Wal-Mart Stores Inc.
Dollar General Corporation
), holds a Zacks Rank #5 (Strong Sell).
DOLLAR GENERAL (DG): Free Stock Analysis
FAMILY DOLLAR (FDO): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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