Covidien plc (COV) announced a double-digit increase in dividend for the sixth year in a row. The medical devices maker increased its quarterly dividend payment by 12.5% to 36 cents per share from 32 cents. The increased dividend is payable on Nov 6, 2014, to shareholders of record as on Oct 7, 2014.
With the rise, the annual dividend payment rose to $1.44 from $1.28 per share. Covidien last increased its dividend by 23.1% to 32 cents from 26 cents per share in October last year.
Covidien posted a 14.3% rise in fiscal 2014-third quarter adjusted earnings per share to $1.04 from 91 cents a year ago, beating the Zacks Consensus Estimate by 4 cents. Net earnings rose 11.0% to $474 million from $427 million.
Total revenues in the quarter grew 4.3% to $2,688 million, marginally missing the Zacks Consensus Estimate of $2,690 million. On a geographic basis, revenues in the U.S. increased 3.2% to $1,325 million.
On the other hand, revenues from non-U.S. developed markets rose 4.2% to $948 million, while revenues from emerging markets went up 8.1% to $415 million.
During the first nine months of fiscal 2014, Covidien’s dividend payments totaled $433 million, up 17.7% from $368 million in the comparable period of fiscal 2013.
In early June, medical technology giant, Medtronic Inc. (MDT) announced its plans to acquire Covidien for $42.9 billion. Medtronic’s rationale behind the merger is to offset the impact of high U.S. corporate tax rate by shifting its tax base overseas, to Ireland. Subject to certain customary conditions, the acquisition is expected to close in the fourth quarter of 2014 or early 2015.
Post-merger, the combined entity will be known as Medtronic plc and will boast a comprehensive product portfolio, a diversified growth profile and broad geographic reach. On successful completion of the transaction, Medtronic plc is expected to report at least $850 million of annual pre-tax cost synergies by the end of fiscal 2018.
The current dividend increase is the maximum amount set under the Medtronic transaction agreement. Covidien would not be able to increase the dividend payment further without prior consent from Medtronic.
Covidien currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include ICU Medical, Inc. (ICUI) and Symmetry Medical, Inc. (SMA). ICU Medical sports a Zacks Rank #1 (Strong Buy), while Symmetry Medical carries a Zacks Rank #2 (Buy).
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