Bard Beefs Up Shareholder Return

Leading medical devices maker CR Bard (BCR) has raised its quarterly dividend by a penny to 21 cents per share, representing 5% growth. This lifts the annual dividend to 84 cents per share from the current payout of 80 cents.

The revised quarterly dividend is payable on Aug 2, 2013, to shareholders of record as on Jul 22, 2013. Bard’s previous dividend increase was in Jun 2012, when it raised the quarterly payout by 5% to 20 cents a share from 19 cents.

The NJ-based company also approved a $500 million share repurchase program. This is in addition to about $30 million outstanding shares under last year’s $500 million share buyback authorization.

The dividend increase along with the share buyback program underscores Bard’s commitment to deliver incremental returns to investors leveraging a solid balance sheet, healthy free cash flow and earnings power. Bard’s solid balance sheet allows the company to support the dividend hike as well as the share repurchase program. The company exited the first quarter of 2013 with cash, restricted cash and short-term investments of $905.3 million, down 1.7% sequentially.

CR Bard remains successful in maintaining a positive earnings surprise streak. Although the company managed to beat estimates this quarter, we remain concerned over the sluggish growth rate in the U.S., despite improvement in the broad market. Its recent acquisitions and initiatives to expand into emerging markets should boost growth in the long term.

Moreover, the company’s claim that the Gore litigation is moving toward a positive direction and is about to complete instills confidence. However, there is always a degree of uncertainty related to legal matters.

The stock carries a Zacks Rank #3 (Hold). Other medical stocks which are expected to do well include CONMED (CNMD), The Cooper Companies (COO) and West Pharmaceuticals (WST). All these stocks carry a Zacks Rank #2 (Buy).