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Badger Meter, Inc. (BMI - Analyst Report), in an effort to add value to shareholders, has increased its quarterly dividend by 1 cent to 17 cents per share. This translates to a 6.25% increase from the prior dividend of 16 cents. The revised dividend will be paid on September 14, 2012, to stockholders of record as of August 31, 2012.

This hike marks the 20th consecutive year of dividend increase for Badger Meter. Last August, Badger Meter hiked its quarterly dividend by 14.3% to 16 cents per share.  

However, the news did not provide much impetus to the stock, as the share price of Badger Meter rose just 0.8% or 28 cents to close at $34.16 last Friday. The forward dividend yield based on the new payout and the last closing price is roughly 2%.

Nevertheless, Badger Meter’s commitment towards increasing shareholders’ return reflects its strong liquidity. The company ended its second-quarter 2012 with cash and cash equivalents of $6.5 million.

Badger Meter reported earnings of 52 cents per share, missing the Zacks Consensus Estimate of 54 cents during second-quarter 2012. Total revenues rose 9% year over year to $82 million, missing the Zacks Consensus Estimate of $86 million.

Badger Meter continues to reallocate its free cash flow in repurchasing shares along with paying dividend religiously. During the reported quarter, the company completed share repurchase of its previously announced $30 million stocks. It repurchased nearly 888,000 shares at an average price of $33.78 per share.

Badger Meter’s recent acquisition of Racine Federated, Inc., along with its previously acquired Cox Flow Measurement and Remag is expected to accelerate its flow of measurement business globally. The company expects to benefit from the synergies.

Moreover, the new products introduced by the company including ORION SE Advanced metering analytics system and the Electronic E-Series received wide acceptance among its customers.

However, the ongoing global economic weakness along with the uncertain municipal financial capabilities may affect the performance of Badger Meter moving forward. Weak housing starts may also worsen the situation.

Badger Meter competes with Itron, Inc. (ITRI - Analyst Report) which does not pay any dividend. The company retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.

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