Staples Raises Dividend - Analyst Blog
March 07 2012 - 4:30AM
Zacks
After only a week’s hiatus since
its earnings release on February 29, Staples Inc.
(SPLS), the global leader in the supply of office products,
announced a dividend hike.
Up Goes
Dividend
The Farmington, Massachusetts-based
company, Staples, raised its annual dividend by 10% to 44 cents (or
11 cents quarterly) from 40 cents a share (or 10 cents quarterly).
The company announced that the increased dividend will be paid on
April 12, 2012, to stockholders of record on March 23, 2012.
However, the news did not provide
much impetus to the stock, as the share price of Staples rose 2.1%
or 31 cents to close at $15.36 on Tuesday. The dividend yield based
on the new payout and the last closing market price is 2.9%.
In March 2011, Staples, an S&P
500 company, last hiked its dividend to 40 cents from 36 cents,
reflecting an increase of 11%.
Financials in
Support
Staples’ commitment towards
increasing shareholders’ return reflects its free cash flow
generating capability, sound liquidity position and defined future
prospects. During fiscal 2011, the company generated free cash flow
of $1,192.8 million and ended the year with cash and cash
equivalents of $1,264.1 million. Management projects free cash flow
generation of over $1 billion in fiscal 2012.
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 bolster investor
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 heaven, 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,
underlining dividend growth potentiality plays a vital role.
Closing
Comment
Staples is better positioned
compared to its competitors in sustaining its growth momentum based
on margin expansion, effective merchandising, and growth prospects
across its retail, delivery and international divisions.
Moreover, the company’s strategic
alliances with Martha Stewart Living Omnimedia Inc
(MSO) and Avery Dennison Corporation’s (AVY)
office and consumer products group for retailing a new product line
for the home office, is a smarter move as the decline in business
and consumer spending and weak credit markets have reduced the
demand for big-ticket items, such as business machines and other
durable products.
Currently, we have a long-term
“Neutral” recommendation on the stock. Staples, which competes with
Office Depot Inc. (ODP) and OfficeMax
Inc. (OMX), holds a Zacks #3 Rank that translates into a
short-term “Hold” rating.
AVERY DENNISON (AVY): Free Stock Analysis Report
MARTHA STWT LIV (MSO): Free Stock Analysis Report
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Officemax (NYSE:OMX)
Historical Stock Chart
From Apr 2024 to May 2024
Officemax (NYSE:OMX)
Historical Stock Chart
From May 2023 to May 2024