Just nearly a week before its first-quarter 2012 earnings
Tiffany & Company
), a high-end jewelry designer, manufacturer and retailer, hit the
market with the news of dividend increase.
Up Goes Dividend
The New York based company, Tiffany, raised its quarterly
dividend by 10%. This is the 11
time the company has hiked its dividend in the last 10 years.
The board approved an increase in annual dividend to $1.28 per
share (or 32 cents quarterly) from $1.16 (or 29 cents quarterly).
The increased dividend is slated to be paid on July 10, 2012, to
shareholders of record as on June 20.
However, the news did not provide any impetus to the stock, as
the share price of Tiffany fell 3.4% or $2.08 to close at $60.07 on
Thursday. The dividend yield based on the new payout and the last
closing market price is 2.1%.
In May 2011, Tiffany, an S&P 500 company, last hiked its
annual dividend to $1.16 from $1.00, reflecting an increase of
Tiffany's commitment towards increasing shareholders' return
reflects its sound liquidity position and defined future prospects.
The company ended fiscal 2011, with cash and cash equivalents and
short-term investments of $442.2 million.
Role of Dividend
Increasing dividend is becoming a trend these days, mostly
followed by companies that boast of a stable cash position and
healthy cash flows. These strategies not only enhance shareholders'
return but also raise the market value of the stock. Through this
strategy, the companies also bolster investors' confidence on the
stock, thereby persuading them to either buy or hold the scrip
instead of selling them.
Perhaps, a hike in dividend appears to be one of the best tools
to win the hearts of the investors, who now prefer to move to a
safe haven, in an economy that is still struggling to recover.
Investors, in order to shield themselves from the upheavals that
the financial world is susceptible to, are now diligently choosing
their portfolio of stocks that can give them the best returns. On
that note, while building the portfolio, dividend growth
potentiality plays a vital role.
Tiffany holds a significant position in the world jewelry market
and is poised to benefit from its increased geographic reach. The
company generates nearly half of its total sales internationally.
We believe that Tiffany is well positioned to deliver healthy sales
and earnings growth.
The company is focused on opening smaller stores that offer
selected collections of lower-priced, higher-margin products, which
in turn boost store productivity. Tiffany concentrates on improving
sales per square foot through higher customer traffic and
converting them into potential buyers by targeted advertising,
ongoing sales training and customer-oriented initiatives.
However, the company's customers remain sensitive to
macroeconomic factors including interest rate hikes, increase in
fuel and energy costs, credit availability, unemployment levels and
high household debt levels, which may negatively impact their
discretionary spending, and in turn hurt the company's growth and
Tiffany, which faces stiff competition from
Signet Jewelers Limited
), is scheduled to release its first-quarter 2012 financial results
on May 24, 2012. Currently, the Zacks Consensus Estimate is pegged
at 70 cents a share, reflecting a year-over-year growth of
Currently, we have a long-term 'Neutral' recommendation on the
stock. Moreover, Tiffany holds a Zacks #3 Rank that translates into
a short-term 'Hold' rating.
SIGNET GRP PLC (SIG): Free Stock Analysis
TIFFANY & CO (TIF): Free Stock Analysis
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