CVS Caremark declared a quarterly dividend of $0.1625 per share this morning, which is a 30% improvement over the $0.125 per share paid each of the previous four quarters by the drugstore chain.
The move sets the table for 2012 to be the ninth consecutive year of dividend growth for CVS, which has rapidly improved its payout during the streak. The company has now increased its quarterly rate by more than 460% since 2003.
Today’s increase doesn’t quite match last year’s 43% dividend hike — the largest from CVS during its streak — but the company is far from tapped out when it comes to dividend growth.
CVS aims to achieve a 25-30% payout ratio by 2015, while today’s dividend rate only represents 20% of the midpoint ($3.20 per share) of its 2012 earnings guidance. Even if you assume CVS won’t be able to grow earnings at all until 2015 — a very conservative assumption, considering the company itself expects 13-17% profit growth in 2012 — there’s still a 25-50% upside to this payout.
Shares of CVS closed Monday’s session trading at $36.56, where they now yield 1.78%. The stock is up about 5% so far this year, and trading quite a bit higher in pre-market action on today’s news