McGraw-Hill Companies, Inc.
) is a beguiling option for investors seeking both growth and
income. This textbook publisher and financial information
provider, yesterday announced its decision of a dividend hike,
following which the shares of this Zacks Rank #3 (Hold) company
gathered momentum and rose to a new 52-week high of $57.49,
before closing at $57.38, up 0.3% from the previous day's
Up Goes Dividend
The news of the dividend hike reflects its plan of utilizing
free cash to enhance shareholders' return, thereby boosting
investors' confidence in the stock.
The N.Y.-based company, raised its quarterly dividend by 9.8%
to 28 cents (or $1.12 annually) from 25.5 cents a share (or $1.02
annually). The increased dividend will be paid on Mar 12, 2013,
to stockholders of record as of Feb 26, 2013. The dividend yield
based on the new payout and the last closing market price is
In Jan 2012, the company last increased its quarterly dividend
by 2% to 25.5 cents. Again, on Dec 27, 2012, McGraw-Hill
announced a special dividend of $2.50 per share paid to
shareholders of record as on Dec 18, 2012.
McGraw-Hill started distributing dividends way back in 1937.
Since 1974, the company has boosted its dividend at a compound
annual dividend growth rate of around 9.6% and is now among those
S&P 500 companies (less than 25), which have raised dividend
annually for the 40
Other companies, which recently increased dividend, include
Family Dollar Stores Inc.
), by 23.8% to 26 cents,
) by 20% to 12 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 McGraw-Hill's balance sheet and cash flow positions.
The company ended the third quarter of 2012 with cash and
short-term investments of $1,245 million, and generated free cash
flow of $420 million during the nine-month period.
Given the earnings growth potential and ability to sustain
dividend increases, the stock has enough ingredients to lure
investors. McGraw-Hill is focusing on restructuring its portfolio
of businesses and concentrating more on high growth operations,
thereby enhancing shareholder value through proper capital
The company in Nov 2012 entered into an agreement with Apollo
Global to divest its education division for $2.5 billion.
McGraw-Hill stated that the company will be known as McGraw Hill
Financial upon completion of the deal and will primarily focus on
capital and commodities markets and include iconic brands like
S&P Ratings, S&P Capital IQ, S&P Indices, Platts and
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