Based on Spectrum Brands Holdings Inc.’s (SPB) ability to generate ample free cash flow, the board of directors initiated the payment of regular quarterly dividends to its shareholders. The company announced its first ever regular quarterly dividend of 25 cents per share. The dividend is payable on Mar 12, 2013 to shareholders with record as of Feb 14, 2013.
The initiation of regular dividends follows the company’s announcement of a one-time special dividend of $1.00 per share in Sep 2012. The company had then announced that it will begin regular dividend payments in fiscal 2013.
Spectrum Brands’ decision to payout regular dividends not only mirrors strong and consistent cash generation but supports its commitment to enhance shareholder value. Looking beyond fiscal 2013, the company expects to evaluate the possibilities of increasing its dividend rate driven by the amount of growth in its free cash flow.
Some of the consumer goods companies that have been rewarding its shareholders via payment of regular dividend over the years include Colgate-Palmolive Co. (CL), Procter & Gamble Co. (PG) and The Clorox Co. (CLX).
Additionally, Spectrum Brands remains focused on using its free cash flow to lower its debt burden. In the fourth quarter of fiscal 2012, the company made voluntary prepayments worth $ 150 million, in order to achieve its targeted total leverage ratio of about 3.4 times by the end of fiscal 2012. These prepayments lowered the company’s term loan to $370 million from the original $750 million borrowed in fiscal 2010.
Spectrum Brands is also focused on strengthening its balance sheet through refinement of its capital structure while also enhancing its financial flexibility in order to boost shareholder value.
Further, the company is in the midst of a major cost cutting process while it looks for opportunities to expand its brand portfolio. The company is also working well with its game changing Spectrum Value Model to deliver genuine value to customers at lower prices compared to its peers. Currently, Spectrum Brands holds a Zacks Rank #3 (Hold).
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