Despite high debt leverage, the board of Nasdaq OMX Group Inc. (NDAQ) announced a 15% hike in its regular dividend pay-out. This marks the first ascent since the companyinitiated cash dividends in Apr 2012.
Accordingly, the raised dividend per share of 15 cents, up from prior 13 cents, will be paid on June 27, 2014, to shareholders of record as on Jun 13. The hike also expanded the annual dividend to 60 cents a share from the prior 52 cents. Based on Thursday’s closing price of $37.14, the raised dividend generates a dividend yield of 1.62%.
Balanced Risk-Reward Profile
Given the ongoing economic volatility that has been pressurizing the top- and bottom line of most exchanges, the current hike appears commendable and optimistic. Moreover, Nasdaq returned $1.19 billion via share repurchases since Jan 2010.
Although share repurchases remained minimal in 2013 due to increased debt obligations, we believe that consistent reductions in expenses and prudent capital managementshould support the bottom line, improve cash flow and accelerate capital deployment. The company had $215 million of stock available for share buybacks at the end of 2013.
Meanwhile, Nasdaq is aggressively focused on improving fundamentals and operating leverage through acquisitions, proactive market expansion and product diversification initiatives. These efforts also enable the company to enter new markets oon a low cost and highly flexible platform, thereby creating additional sales opportunities in the long run.
While the Zacks Consensus Estimate for 2014 and 2015 remained intact in the last 30 days, at $2.99 and $3.43 per share, these are expected to rise 15.1% and 14.5%, respectively, on a year-over-year basis.
Moreover, the Most Accurate Estimate for Nasdaq’s 2014 and 2015 earnings stands at $3.07 and $3.64 a share, resulting in an Earnings ESP of +2.7% and +6.1%, respectively.
While Nasdaq carries a Zacks Rank #3 (Hold), some better-ranked financial stocks include General Finance Corp. (GFN), Portfolio Recovery Associates Inc. (PRAA) and Global Payments Inc. (GPN). All these stocks bear a Zacks Rank #2 (Buy).