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Danaher Hikes Dividend, Shares Fall

Zacks Equity Research

In its efforts to share more profit with its shareholders, the board of directors of Danaher Corp. (DHR) recently approved a 300% increase in the quarterly dividend. The company will now pay a quarterly dividend of 10 cents per share, up from 2.5 cents paid on Dec 26, 2013.

The increased dividend will be paid on Apr 25, 2014 to shareholders of record on Mar 28. Based on the closing share price of $75.94 on Feb 18, 2014, the new dividend implies a dividend yield of 0.53%.

Though this substantial hike came after a hiatus of three years, the news failed to move the investors’ sentiments as the company’s stock price decreased 0.6% on the day, likely because of the company’s still poor dividend yield. Even after the hike, Danaher’s yield is almost half of the industry average of 1.10%.  

Its previous dividend increase took place on Sep 28, 2011, when it was raised to 2.5 cents from 2 cents per share.

This recent dividend hike is supported by its robust cash balance and its ability to generate healthy cash flow, which in turn, is attributable to its continuing effectiveness of the Danaher Business system. While cash and equivalents balance surged 82% year over year to $3.1 billion at 2013 end, cash from operations in 2013 also increased 5.0% to $3.6 billion. The company’s retained earnings also stood solid at $18.0 billion, increasing 16.9% year over year, reflecting its capacity to pay even higher dividends.

With approximately 713.8 million shares outstanding at fourth quarter end, the company needs to dish out $285.5 million annually as dividend. The strong financial position will well cushion the payout.

Another stock in the diversified operations industry that was in the news for raising its dividend is 3M Co. (MMM). The company hiked its quarterly dividend from 63.5 cents to 85.5 cents per share on Feb 12, 2014, reflecting a high dividend yield of 2.59%.

Danaher currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks that can be considered at the moment include Hutchison Whampoa Ltd (HUWHY) and Marubeni Corp. (MARUY), both of which have a Zacks Rank #2 (Buy).

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Read the Full Research Report on MMM
Read the Full Research Report on HUWHY
Read the Full Research Report on MARUY

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