) is a beguiling option for investors seeking both growth and
income. This video game and entertainment software retailer
yesterday announced its decision of a dividend hike, following
which the shares rose 0.5% to close at $25.50.
Up Goes Dividend
This Grapevine, Texas based company, raised its quarterly
dividend by 10% to 27.5 cents (or $1.10 annually) from 25 cents a
share (or $1.00 annually). The increased dividend will be paid on
Mar 19, 2013, to stockholders of record as of Mar 5, 2013. The
dividend yield based on the new payout and the last closing
market price is approximately 4.3%.
The news of the dividend hike reflects GameStop's plan of
utilizing free cash to enhance shareholders' return, thereby
boosting investors' confidence in the stock.
In Aug 2012, the company last increased its quarterly dividend
by 67% to 25 cents. GameStop has been actively managing its cash
flows and returning much of its free cash to shareholders via
dividends, while maintaining a healthy balance sheet and credit
ratios that are necessary for an investment-grade rating.
Other companies, which recently increased dividend, include
Family Dollar Stores Inc.
), by 23.8% to 26 cents,
The McGraw-Hill Companies, Inc.
) by 9.8% to 28 cents, and
) by 15% to 23 cents.
Role of Dividend
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.
A dividend hike primarily reflects the company's sound
financial position and defined future prospects. This is quite
evident from GameStop's balance sheet and cash flow positions.
The company ended the third quarter of 2012 with cash and cash
equivalents of $366.4 million.
GameStop currently holds a Zacks Rank #4 (Sell) that well
indicates the stock's dismal holiday sales performance. Holiday
sales for the nine-week period ended Dec 29, 2012 dropped 4.6%,
while comparable-store sales fell 4.4%. GameStop now projects
comparable-store sales to decline between 4% and 7% during the
fourth quarter and in the range of 7.5% to 9% in fiscal 2012. The
company also restricts its fourth-quarter fiscal 2012 earnings
outlook at the lower-end of the previously provided guidance
range of $2.07 to $2.27 per share.
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