Orthopedic devices major
) has raised its quarterly cash dividend to 26.5 cents from 21.25
cents, representing a 25% growth. This increases the annual
dividend to $1.06 cents per share from the current payout of 85
cents, which equates to a dividend yield of roughly 2%. The
revised quarterly dividend is payable on January 31, 2012, to
shareholders of record as on December 31, 2012.
In addition, the Michigan-based company approved an additional
$405 million share repurchase authorization, which raises the
total to $1 billion. The repurchase will be executed from time to
time based on market conditions, stock price and other
The dividend increase along with the share buyback program
underscores Stryker's commitment to deliver incremental returns
to investors leveraging a solid balance sheet, healthy free cash
flow and earnings power.
Stryker's solid balance sheet allows the company to support
the dividend hike as well as the share repurchase program. The
company exited the third quarter of 2012 with cash and cash
equivalents and marketable securities of $3,863 million, up
20.2%. It had repurchased roughly 0.4 million shares for $19
million in the reported quarter.
However, the company's share price remained roughly unchanged
to close at $54.35 on December 6, 2012. This might reflect on the
fact that the news was unable to encourage investor confidence on
Stryker's previous dividend increase was in December 2011,
when it raised the quarterly payout by 14.3% to 20 cents a share
from 17.5 cents. In 2011, total dividend payments to shareholders
were $279 and the total cash used for share repurchases was
With a market-cap of $20.66 billion, Stryker is one of the
world's largest medical device companies operating in the global
orthopedic market. Further, expansion into fast-growing
international markets via strategic acquisitions and new product
launches represent attractive growth opportunities.
The company has managed to meet the Zacks Consensus Estimate
in three of the last four quarters. However, it missed the same
by 1.02% in the last quarter. The current Zacks Consensus
Estimates for the fourth and the full-year 2012 are $1.08 cents
and $4.05, respectively.
Stryker faces several challenges, which include still soft
international sales, tough hospital capital budgets and the
upcoming Med-tech tax. Moreover, despite recent stability in the
domestic market, it remains challenged by currency fluctuations
and pricing pressure. Additionally, Stryker operates in the
highly competitive orthopedic industry and faces strong
competition from players like
Zimmer Holdings Inc.
We currently have a 'Neutral' recommendation on Stryker. The
stock carries a short-term Zacks #4 Rank (Sell rating).
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