PetSmart Ups Shareholders Value

PetSmart Inc. ( PETM - Snapshot Report ) , the specialty retailer of products, services and solutions for pets, has increased its quarterly dividend to 16.5 cents per share, bringing its annualized dividend payout to 66 cents per share.

The new dividend rate reflects an 18% growth over the previous quarterly dividend of 14 cents per share (annualized 56 cents per share), which was paid in May 2012. As per the company, the increased dividend will be paid on August 10, 2012 to shareholders of record on July 27, 2012. The dividend yield based on the new payout and the closing market price on June 18, 2012 is approximately 1%.

Further, the company also announced a new $525 million share buyback plan expiring in January 2014. The new authorization will be supplementing the existing plan, under which there is $103.6 million remaining as of April29, 2012.

Dividend increases and share buybacks are resorted to by companies that wish to return excess cash to shareholders. Of course, these measures can only be taken by companies such as PetSmart, which boasts of a stable cash position and healthy cash flows. These actions not only increase shareholders’ return but also have a positive impact on the market value of the stock.

As of April 29, 2012, PetSmart had $149.6 million in cash from operations and incurred $36 million in capital expenditures (reflecting a free cash flow of $113.6 million). During the recently concluded quarter, the company repurchased $175 million stock and disseminated $15 million in dividend payments.

The company’s innovative and differentiated products and its sustained effort to expand its portfolio of brands and assortments have helped to deliver healthy results. In a move to boost sales, PetSmart has collaborated with Martha Stewart Living Omnimedia Inc. ( MSO - Snapshot Report ) to launch different lines of pet products.

For fiscal 2012, the company expects earnings in the range of $3.19 to $3.31 per share, while comparable store sales are projected to increase in the mid-single-digit range, with total sales growth of 9% to 10%. Gross margin is expected to expand by 65 to 75 basis points.

For the second quarter of 2012, the company expects comparable store sales to increase in the mid-single-digits range, while earnings per share are expected to be in the range of 61 cents to 65 cents.

PetSmart holds a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating, reflecting the company’s consistent strong performance as well as its positive outlook.