Global marketing and corporate communications company
Omnicom Group Inc.
) recently increased its dividend payout by 33.33% year over year
to a quarterly payment of 40 cents per share or $1.60 on an
annualized basis. The first quarter 2013 dividend is payable on
Apr 2 to shareholders of record as of Mar 5.
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Based on the closing price of $56.02 on Feb 12, 2013, the
proposed dividend affirms a yield of 2.1%. A steady dividend
payout facilitates the long-term strategy of Omnicom to provide
attractive risk-adjusted returns to its stockholders. In
addition, decent dividend increases at periodic intervals have
been one of the company's most attractive features.
The company had earlier hiked its dividend in first quarter 2012,
when it raised the quarterly dividend payout from 25 cents to 30
cents per share or from $1.00 to $1.20 on an annualized basis.
Prior to that, Omnicom raised its quarterly dividend in first
quarter 2011 from 20 cents to 25 cents per share, and in first
quarter 2010 from 15 cents to 20 cents.
The company also has a share repurchase program in place, under
which it repurchased shares worth $832 million in 2012. Omnicom
has consistently returned significant cash to its
shareholders. In the 10-year period from 2002 to 2012,
Omnicom distributed over 99% of net income to shareholders
through dividends and share repurchases.
The recent dividend hike follows strong quarterly and annual
results that helped the company to comprehensively beat the Zacks
Consensus Estimates. The company also has a healthy liquidity
position. Cash and short-term investments aggregated $2,699
million at year-end 2012, while free cash flow for the year was
Omnicom has a strong track record of winning new clients and
receiving additional deals from the existing ones. The company's
business mix is well diversified geographically and benefits
largely from the growing markets. In addition, the company's
efforts in maintaining controlled expenses and strong global
reputation are commendable.
However, the company needs to be wary of stiff competition from
other players in the industry such as
Publicis Groupe SA
), carrying a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2
(Buy), respectively. Another competitor worth mentioning is
AirMedia Group Inc.
). Omnicom presently has a Zacks Rank #3 (Hold).