The market reacted positively toward PetSmart, Inc.’s (PETM) shareholder friendly moves, as its shares rose about 2.8%. This comes within a day of the company’s announcement of an increase in its quarterly dividend and the authorization of a new share repurchase plan. We believe the stock should gain further momentum in the days ahead.
This specialty retailer of products, services and solutions for pets hiked its quarterly dividend by 18% to 19.5 cents (or 78 cents annually) from 16.5 cents a share (or 66 cents annually). The increased dividend will be paid on Nov 15, 2013, to shareholders of record as of Nov 1, 2013.
The company’s commitment toward increasing shareholders’ return reflects its free cash flow generating capability, sound liquidity position and defined future prospects. The dividend yield based on the new payout and the last closing market price is 1%.
Dividend hikes not only enhance shareholder returns but raise the market value of the stock. Through this strategy, companies bolster investors’ confidence on the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, the company remains confident of its growth potential, suggesting enhanced value for shareholders.
PetSmart last hiked its quarterly dividend to 16.5 cents from 14 cents in Jun 2012, reflecting an increase of approximately 18%.
Alongside, PetSmart’s board authorized a new $535 million share buyback program to be commenced on Oct 1 and expires on Jan 31, 2015.
Currently, PetSmart holds a Zacks Rank #3 (Hold).
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