Nearly three days after reporting its fourth-quarter fiscal 20Array5 results, Macy’s, Inc. M is back in the limelight with the announcement of a dividend hike and an additional share repurchase program. This Cincinnati, OH-based company raised its quarterly dividend by 5% to 37.75 cents (or $Array.5Array annually) from the current payout of 36 cents (or $Array.44 annually). This will be Macy’s sixth dividend hike in the last five years and is over seven times the amount of 5 cents a share paid in 2009.
The increased dividend is payable from July and the record date is expected to be on or about Jun Array5, 20Array6. Dividend hikes not only enhance shareholder returns, but also raise the market value of the stock. Through this strategy, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it.
Investors prefer an income generating stock and a dividend paying one is always a preferable option. People looking for regular income from stocks are most likely to choose companies that have a consistent and incremental dividend payout track.
Other companies that increased their quarterly dividend in the recent past include Meredith Corporation MDP and GameStop Corp. GME. While Meredith hiked its dividend by 8.2% to 49.5 cents per share, GameStop is committed to return 3% to shareholders through its dividend of 37 cents per share. Another company, Dick's Sporting Goods Inc. DKS, raised its dividend by Array0% to Array5.Array25 cents per share.
Apart from raising its dividend, Macy’s board of directors enhanced the share buyback authorization by $Array.5 billion, thereby bringing the total repurchase program to approximately $2 billion as of Jan 30, 20Array6. Since Aug 20ArrayArray, when the company recommenced its share repurchase activity, it bought back about Array52.2 million shares through Jan 30, 20Array6, for a total consideration of $7.3 billion.
Macy’s, which carries a Zacks Rank #3 (Hold), intends to boost shareholder value through dividend payouts, share repurchases and strategic investments in businesses to drive growth.
With regard to Macy’s performance in the final quarter of fiscal 20Array5, the company came up with the second straight quarter of positive earnings surprise. Net sales also surpassed the Zacks Consensus Estimate, after missing the same in the last eight successive quarters. However, the company failed to check the decline in its bottom line that plunged Array4.3% year over year, hurt by a 5.3% fall in the top line and subdued margins.
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