Shareholders of security and protection services provider Tyco International Ltd. (TYC) recently approved a plan to increase its share repurchase program by an additional $1 billion. The increased share repurchase authorization is likely to act as a cushion as the current program is scheduled to be completed by the first quarter of fiscal 2015.
At the same time, the company maintained its quarterly dividend payout at 18 cents per share. Over the years, Tyco has consistently returned significant cash to shareholders through dividends and share repurchases. A steady dividend payout is part of the long-term strategy of Tyco to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
The shareholders also approved the merger of the parent company with its wholly-owned subsidiary Tyco International plc. The merger is expected to close by November this year. Post-merger, each shareholder of the parent company will receive a share of this Ireland-based subsidiary for every share held.
We remain bullish on Tyco’s fortunes based on the relative stability of the global security markets as well as high and predictable cash generation, limited balance sheet risk and easy cost-out opportunities. The company’s solid balance sheet and healthy liquidity position are also potential catalysts to continuously fund organic and inorganic growth initiatives and maximize return for its shareholders.
Tyco provides latest fire protection and security products and services to more than three million customers across the globe. The company has more than 57,000 employees in over 1,000 locations across 50 countries, serving various end markets, including commercial, institutional, governmental, retail, industrial and energy, residential and small businesses.
Tyco currently has a Zacks Rank #3 (Hold). Other stocks in the industry that are worth considering include Federal Signal Corp. (FSS), ITT Corporation (ITT) and AO Smith Corp. (AOS), each carrying a Zacks Rank #2 (Buy).
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