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CBS Enhances Shareholder Value

Zacks Equity Research

In a bid to enhance shareholder’s value, CBS Corporation (CBS) recently announced that its Board of Directors have agreed to enhance its share repurchase program and hike the quarterly cash dividend.

The share repurchase authorization will rise by 57% to $4.7 billion from the initial program announced in January 2011. Under the new program, the company has already repurchased shares of worth $1.7 billion, with $3 billion remaining for future repurchases. The company aims to complete the new share repurchase program by the end of 2014.

Additionally, the board of directors also approved a 20% rise in its quarterly cash dividend to 12 cents from 10 cents a share.

The increased dividend will be paid on October 1, 2012 to the shareholders of record as of September 10, 2012. The annualized dividend yield based on the increased dividend and current stock price is 1.5%.

Previously, on May 3, 2011, CBS doubled its dividend to 10 cents from 5 cents per share.

CBS, which competes with News Corporation (NWSA) and Comcast Corporation (CMCSA), has been actively managing its cash flows by generating healthy free cash, making prudent capital investments and enhancing shareholders’ return. The company generated free cash flow of $607 million, incurred capital expenditures of $39 million, repurchased shares worth of $269 billion in the first quarter and ended with cash and cash equivalents of $794 million.

The company’s decision to increase its share repurchases authorization and dividend clearly suggests the ability to generate liquidity and its potential to improve in the long run.

CBS remains well positioned to drive revenue growth in the coming quarters through its strategic initiatives and operating efficiencies. Management remains optimistic and expects growth momentum to continue in fiscal 2012 based on reverse compensation from affiliates, strong demand of its content and online video streaming, retransmission consent, and political advertising.

Based on better-than-expected first quarter 2012 results and ability to generate strong free cash flow, CBS Corporation carries Zacks #2 Rank, implying a short-term Buy rating. We also maintain our long-term Outperform recommendation on the stock.

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