Leading pharmaceutical care provider Omnicare Inc has raised its quarterly dividend to 4 cents a share from 3.25 cents, representing a 23% hike. This lifts the annual dividend to 16 cents per share from the current payout of 13 cents.
The revised quarterly dividend is payable on June 20, 2011, to shareholders of record as of June 10, 2011. The company last increased its quarterly dividend by a penny in August 2010.
Separately, the Kentucky-based company’s Board has approved an additional $100 million share repurchase authorization, representing another commitment to boost shareholder returns. The new repurchase program authorizes Omnicare to buyback shares from time to time through December 31, 2012. Cumulatively, the company now has roughly $146 million available for repurchases.
Omnicare boasts a reasonably sound balance sheet and is well positioned with healthy cash flows, which it can use for acquisitions, debt repayments and share repurchases.
The company’s first-quarter fiscal 2011 revenues and earnings both beat the Zacks Consensus Estimates. Cash and cash equivalent gone up 44% year over year in the quarter while operating cash flows surged roughly 22%.
Omnicare is a market leader in an industry that is essential to serving the needs of the population seeking long-term care. The company has a rich history of growth through acquisitions, which has made it a dominant player in the industry. Omnicare competes with PharMerica Corporation (PMC - Snapshot Report) in certain niche segments.
Omnicare has reduced costs and increased efficiency through its “Full Potential Plan (FPP),” a program designed to optimize resources across the organization. However, the benefits of the FPP are partly masked by pressure from reimbursement cuts on generic drugs.
Nevertheless, in the longer term, Omnicare will be able to offset some of these reimbursement exposures through better purchasing. Moreover, market entry of several generic products represents a substantial opportunity given Omnicare’s higher exposure to the institutional pharmacy channel.