Tiffany & Company (TIF), a high-end jewelry designer, manufacturer and retailer, revealed its plan to utilize its free cash to boost stakeholders’ return by announcing a dividend hike.
The N.Y. based company, raised its quarterly dividend by 6% to 34 cents (or $1.36 annually) from 32 cents a share (or $1.28 annually). The increased dividend will be paid on Jul 10, 2013, to shareholders of record as of Jun 20, 2013. This is 12th time that Tiffany has hiked its dividend in the last 11 years.
The company’s commitment toward increasing shareholders’ return reflects its free cash flow generating capability, sound liquidity position and defined future prospects.
However, the news did not provide impetus to the stock, as the share price of this Zacks Rank #3 (Hold) company dropped 0.1% or 9 cents to close at $76.49 on Thursday. The dividend yield based on the new payout and the last closing market price is 1.8%.
Tiffany, an S&P 500 company, last hiked its quarterly dividend to 32 cents from 29 cents in May 2012, reflecting an increase of 10%.
Other companies, which recently increased quarterly dividend, include The Clorox Company (CLX) by 11% to 71 cents, American Water Works (AWK) by 12% to 28 cents, and Baxter International (BAX) by 9% to 49 cents.
Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies bolster investor confidence on the stock, thereby persuading them to either buy or hold the scrip instead of selling them. Looking ahead, the company remains confident of its growth potential, suggesting enhanced value for shareholders.
A dividend hike primarily reflects the company’s sound financial position and defined future prospects. This is quite evident from Tiffany’s balance sheet and cash flow positions. The company ended fiscal 2012 with cash and cash equivalents of $504.8 million and generated free cash flow of $300 million during the fiscal year.
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