Orthopedic devices major Stryker Corp (SYK) has beefed up its quarterly dividend to 21.25 cents a share from 18 cents, representing an 18% hike. This lifts the annual dividend to 85 cents per share from the current payout of 72 cents, which equates to a dividend yield of roughly 1.8%. The revised quarterly dividend is payable on January 31, 2012, to shareholders of record as on December 29, 2011.
Separately, the Michigan-based company’s Board has approved an additional $500 million share repurchase authorization, representing another commitment to boost shareholder returns. The repurchase will be executed from time to time based on market conditions, stock price and other factors.
Stryker has returned roughly $2.9 billion to its shareholders over the past four years in the form of dividends (of around $850 million) and share buybacks (of roughly $2 billion). During the current year (as of December 7), the company has paid dividend of roughly $280 million and bought back shares worth $625 million.
The dividend increase underscores Stryker’s commitment to deliver incremental returns to investors leveraging a solid balance sheet, healthy free cash flows and earnings power. The company’s strong balance sheet enables it to grow business through incremental R&D investment while maximizing investor value, concurrently.
Stryker’s third-quarter fiscal 2011 adjusted earnings of 91 cents a share beat the Zacks Consensus Estimate of 89 cents. Revenues jumped roughly 15% year over year, triggered by higher sales across the board, strongly backed by acquisitions. The company raised its earnings forecast for fiscal 2011.
Stryker is poised for growth on the heels of new products, acquisitions and recovery in capital spending by hospitals. The company is expanding its product portfolio by acquiring complementary businesses leveraging a solid balance sheet.
However, Stryker operates in a highly competitive orthopedic industry and faces strong competition from players like Zimmer (ZMH), Johnson & Johnson’s (JNJ) DePuy and Smith & Nephew (SNN). The company is challenged by competition-driven pricing pressure on implant products and a still sluggish reconstructive implant market.
Currently, we have a long-term Neutral rating on Stryker. The stock retains a Zacks #2 Rank, which translates into a short-term Buy recommendation.
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