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Rockwell Automation, Inc. (ROK - Analyst Report), in an effort to add value to the shareholders, has upped its quarterly dividend by 4.5 cents to 47 cents per share. This translates to an 11% increase from the prior dividend of 42.5 cents. The revised dividend will be paid on September 10, 2012, to stockholders of record as of August 13, 2012.

Rockwell’s commitment towards increasing shareholders’ return reflects its free cash flow generating capability and a strong balance sheet. During the second quarter of fiscal 2012, the company generated free cash flow of $230 million and ended the quarter with cash and cash equivalents of $811.8 million.

The dividend hike came after almost one-and-half years. It was in January last year that Rockwell increased its quarterly dividend by 21% to 42.5 cents per share.

Separately, the company’s Board has approved the addition of $1 billion to its share repurchase program. This is in addition to the previous buy-back authorization of $1 billion, of which the company had $51 million remaining as of June 7, 2012. 

During the second quarter of fiscal 2012, Rockwell repurchased 0.5 million shares for $40.6 million. The pace of share repurchase slowed down during the quarter. The company expects to repurchase nearly 3 million shares for the balance of the year.

However, the news did not provide much impetus to the stock, as the share price of Rockwell rose 1.1% or 71 cents to close at $69.87 last Friday. The forward dividend yield based on the new payout and the last closing price is roughly 2.7%.

The macroeconomic conditions are expected provide a headwind for Rockwell. The company has, therefore, narrowed its guidance for the balance of the year. It expects earnings to be in the range of $5.10-$5.40 per share versus the previous target of $5.05-$5.45. Revenues are narrowed in the range of $6.25-$6.45 billion from $6.2-$6.5 billion.

Currency will also prove a headwind for revenues in the remaining quarters of 2012. It is expected that currency translation will reduce sales by 2 percentage points for the full year compared with the previous guidance of 1 percentage point.

Rockwell competes with ABB Ltd. (ABB - Analyst Report) and Siemens AG . The stock retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on Rockwell.

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