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Analyst Blog

Security and protection services provider Tyco International Ltd. (TYC - Analyst Report) recently got shareholders’ approval for increasing its dividend payout. The quarterly dividend of 18 cents per share or 72 cents on an annualized basis represents a 12.5% hike from the existing payout.

Based on the closing price of $43.81 as on Mar 6, the proposed dividend affirms a decent yield of 1.6%. Tyco will pay the first of the increased quarterly dividends on May 21 to shareholders of record on Apr 25.

A steady dividend payout is part of the long-term strategy of Tyco to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.

The company had earlier hiked its dividend in Apr 2013, when it raised the quarterly dividend payout from 15 cents to 16 cents per share or from 60 cents to 64 cents on an annualized basis. Tyco also has a share repurchase program in place and has consistently returned significant cash to its shareholders through dividends and share repurchases. Just a few days back, Tyco increased its share repurchase authorization to $2 billion from the existing $1.75 billion.

All these factors probably fuelled the stock price momentum, with Tyco scaling a new 52-week high of $43.98, before closing the trading session a notch lower at $43.81. This comes to a healthy year-over-year return of 37.6%.

Tyco’s share prices have steadily been on an uptrend from Sep 2013. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamental strength to drive it upward. The stock is currently trading at a forward P/E of 20.8x and has a long-term earnings growth expectation of 13.9%.

Stocks in the industry that warrant a look include 3M Company (MMM - Analyst Report), Marubeni Corp. and Mitsubishi Corporation , each of which carry a Zacks Rank #2 (Buy).

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