In an effort to distribute more profit among shareholders, the board of directors of CBOE Holdings, Inc. (CBOE) increased its dividend by 50%. The company will now pay a quarterly dividend of 18 cents per share, up from 15 cents paid on Jun 21, 2013.
The newly increased dividend will be paid on Sep 20, 2013 to the shareholders of record as of Aug 30, 2013. Based on the closing share price of $49.73 on Jul 30, the increased dividend implies a dividend yield of 1.4%.
The current dividend yield is better than another securities exchange MarketAxess Holdings Inc.’s (MKTX) yield of 1.0%. It however lags the industry yield of 1.59% and some of other securities exchanges CME Group Inc. (CME) with a yield of 2.43% and NASDAQ OMX Group Inc (NDAQ) with a yield of 1.6%
The dividend hike was primarily supported by CBOE Holdings’s strong balance sheet and its ability to generate healthy cash flow. Based on the 87.3 million shares outstanding as of Mar 31, 2013, CBOE Holdings requires $15.7 million for the payment of the quarterly dividend.
Cash balance at the end of the first quarter stood at nearly $210.5 million (surging 55% over 2012 end level) while cash from operations in the first quarter improved 50% year over year to $95.3 million.
The recent hike marks the third consecutive year of dividend increase by CBOE Holdings. Earlier, at July end 2012, the board had approved a 25% increase, raising the dividend to 15 cents from 12 cents. Additionally, it also authorized a buyback program worth $100 million.
CBOE Holdings delivered 10 straight quarters of positive earnings surprise with an average beat of 7.1% due to the strength of its proprietary products. We wait to see if the company can continue with the trend into the second quarter. This is because Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) is 0.00% but the stock carries a Zacks Rank #2 (Buy) (Stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings).
The combination of CBOE Holdings’ ESP and Zacks Rank makes surprise prediction uncertain. The Zacks Consensus Estimate is currently pegged at 52 cents, up 17.2% year over year.
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