Global marketing and corporate communications company Omnicom Group Inc. (OMC) recently declared a dividend of 40 cents per share or $1.60 on an annualized basis. The second quarter 2013 dividend is payable on Jul 11 to shareholders of record as of Jun 14.
Based on the closing price of $63.00 on May 21, 2013, the dividend affirms a yield of 2.5%. A steady dividend payout facilitates the long-term strategy of Omnicom to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
The company had earlier hiked its dividend in first quarter 2013, when it raised the quarterly dividend payout from 30 cents to 40 cents per share or from $1.20 to $1.60 on an annualized basis. Prior to that, Omnicom raised its quarterly dividend in first quarter 2012 when it raised the quarterly dividend payout from 25 cents to 30 cents per share, in first quarter 2011 from 20 cents to 25 cents per share, and in first quarter 2010 from 15 cents to 20 cents.
The company also has a share repurchase program in place, under which it repurchased shares worth $832 million in 2012. Omnicom has consistently returned significant cash to its shareholders. In the 10-year period from 2002 to 2012, Omnicom distributed over 99% of net income to shareholders through dividends and share repurchases.
The company also has a healthy liquidity position. Omnicom generated free cash flow of $302.1 million in first quarter 2013. Cash and short-term investments aggregated $2,090 million at quarter-end compared to $1,509 million in the prior year. Return on equity (:ROE) for twelve months ended Mar 31, 2013 was 29.6% compared to 26.9% for the same period in the preceding year.
Omnicom has a strong track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well diversified geographically and benefits largely from the growing markets. In addition, the company’s efforts in maintaining controlled expenses and strong global reputation are commendable.
Omnicom presently has a Zacks Rank #3 (Hold). Other players in the industry worth mentioning include WPP plc (WPPGY) carrying a Zacks Rank #1 (Strong Buy), and Huron Consulting Group Inc. (HURN) and ICF International Inc. (ICFI), each carrying a Zacks Rank #2 (Buy).
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