Fred's Boosts Investor Value - Analyst Blog

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Fred's Inc. ( FRED ) heaved up its quarterly dividend to 6 cents per share from 5 cents per share. On an annualized basis, Fred's dividend equates to 24 cents per share compared with 20 cents a year earlier.

Management said that the dividend hike reflects "strong cash flow, the 2012 financial plan and the capital requirements of continued new store and pharmacy growth."

The increased dividend is payable on March 15, 2012, to shareholders of record as of March 1, 2012. The company hiked its dividend by 20% and Fred's boasts a record of increasing its shareholders' value for 4 years consecutively. The annual yield on the dividend is 1.7%.

The move comes soon after the company reported that revenue from stores operating for at least a year fell 0.8% in January, owing to a weak job market. However, total revenue during the fourth quarter climbed 2% to $497.7 million from $485.6 million last year.

The company also announced its plans of expanding its existing stock repurchase program. The board authorized the repurchase of an additional 3.6 million shares or 10% of the currently outstanding shares.

Fred's has bought back 3.9 billion shares, which is most of the shares authorized  under a plan approved in 2007. The company has roughly 36.8 million shares outstanding.

Fred's expects its fourth quarter net income to be at the low end to midpoint of its projected range of 23 cents to 27 cents per share, reflecting benefit from controlling expenses.

At the end of October 29, 2011, Fred's cash and cash equivalents went down to $19.97 million, compared with$37.5 million as of October 30, 2010.

Fred's faces stiff competition from Dollar General Corporation ( DG ) and Walgreen Co. ( WAG ). It currently holds a Zacks #3 Rank, which translates into a short-term Hold rating. On a long-term basis, we maintain a Neutral recommendation on the stock.


 
DOLLAR GENERAL ( DG ): Free Stock Analysis Report
 
FREDS INC ( FRED ): Free Stock Analysis Report
 
WALGREEN CO ( WAG ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DG , FRED , WAG

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