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The Kroger Company (KR - Analyst Report), one of the largest grocery retailers, revealed its plan to utilize its free cash to boost stakeholders’ return by announcing a dividend hike.

The Cincinnati, Ohio based company, raised its quarterly dividend by 10% to 16.5 cents (or 66 cents annually) from 15 cents a share (or 60 cents annually). The increased dividend will be paid on Dec 1, 2013, to shareholders of record as of Nov 15, 2013.

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 much impetus to the stock, as the share price of this Zacks Rank #3 (Hold) company rose 1.1% or 43 cents to close at $40.99 on Thursday. The dividend yield based on the new payout and the last closing market price is 1.6%.

This is the seventh consecutive annual increase in Kroger’s quarterly dividend since it reinstated dividend payment in 2006 at the rate of 6.5 cents per share. Since then, Kroger has returned over $8.3 billion to stakeholders via dividends and share buyback.

Kroger, an S&P 500 company, last hiked its quarterly dividend to 15 cents from 11.5 cents in Sep 2012, reflecting an increase of approximately 30%.

The news of the dividend hike came over a week after the company posted impressive second-quarter fiscal 2013 results, wherein earnings of 60 cents a share surged from 51 cents earned in the prior-year quarter, buoyed by the Customer 1st strategy.

Other companies, which recently increased quarterly dividend, include McDonald's Corp. (MCD - Analyst Report) by 5% to 81 cents, Microsoft Corporation (MSFT - Analyst Report) by 22% to 28 cents, and Scholastic Corporation (SCHL - Snapshot Report) by 20% to 15 cents.

Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies bolster investors’ 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.

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