Shares of MSCI Inc. (MSCI) increased 5.8% on Thursday, Sep 18 with the company boosting shareholders’ value through the inception of a dividend program. The company has affirmed a quarterly cash dividend of 18 cents per share. It will be paid on Oct 31, 2014 to shareholders of record as of Oct 15, 2014. The program is expected to return nearly $1 billion to MSCI investors by the end of 2016.
Concurrently, the board of MSCI announced that it has authorized a share repurchase program to repurchase $850 million of its outstanding common stock, up from $300 million announced previously. The share buyback also includes an accelerated share repurchase (“ASR”) agreement with Goldman Sachs (GS) worth $300 million. These initiatives will help MSCI to reduce its outstanding share count, thereby increasing earnings per share and return on equity.
This is not the first share repurchase program undertaken by MSCI. It has undertaken such buybacks in 2011, 2012 and 2013. In addition, MSCI remains focused on improving its financial position and will continue to make strategic investments.
MSCI’s financial strength enables it to continue with its buyback program and initiate dividend payouts. As of Jun 30, 2014, the company’s cash and cash equivalents were $683.2 million. The increased repurchase authorization and new dividend payouts are expected to boost investor confidence in the stock. MSCI’s strategy to return wealth to shareholders demonstrates its growth potential and stable liquidity position.
MSCI reported second-quarter 2014 results on Jul 31. It reported adjusted earnings per share of 55 cents, which surpassed the Zacks Consensus Estimate of 49 cents. Earnings per share surged 5.8% from 52 cents in the second quarter of 2013.
Revenues increased 11.3% year on year to $254.2 million, beating the Zacks Consensus Estimate of $245 million. The increase was attributable to higher revenues from all operating segments.
MSCI Inc. is a leading provider of investment decision support tools to investment institutions worldwide. MSCI Inc. products include indices and portfolio analytics for use in managing equity, fixed income and multi-asset class portfolios.
We believe that share repurchases and dividend payments not only enhance shareholder return but raise the stock’s market value as well. Looking ahead, MSCI remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks.
However, competitive threats from FTSE International, Ltd., Russell Investment Group and S&P Dow Jones Indices LLC, lower dividend yield as well as low inflation may temper growth to some extent.
Current, MSCI carries a Zacks Rank #3 (Hold).
Some other stocks that are performing well in the technology sector include Micron Technology (MU) and Cirrus Logic Inc. (CRUS), both of which sport a Zacks Rank #1 (Strong Buy).
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