Omnicare Inc. , a Fortune 400 company, recently announced that its Board has approved a hike in its quarterly cash dividend by 100% to 14 cents a share. The revised dividend, with a record date of September 24, 2012, is payable on September 28.
Simultaneously, the Board approved an additional share buyback of up to $350 million of the company’s common stock, which it can repurchase from time to time through December 31, 2014. Omnicare’s existing share repurchase authorization is effective through February 28, 2014, of which $148 million remains to be bought back. As a result, the total shares repurchase authorization stands at $498 million, as of September 11, 2012.
The Board’s decisions reflect Omnicare’s balanced approach towards achieving its objective of returning wealth to its shareholders. The dividend hike marks the fourth authorized increase in the quarterly cash dividend since August, 2010. This trend echoes the company’s ability to sustain profitable growth in the longer-term. It is also expected to add investment value to the otherwise undervalued stock.
The share repurchase program will reduce the number of shares outstanding, which stood at 113,472,000, as of June 30, 2012. Omnicare ended the second quarter with cash and equivalents of $564.5 million, up 7.7% year over year. Cash flows from continuing operations, in the quarter, were $120.2 million, down 12.2% year over year. Management remains committed to return at least 25% of the company’s operating cash flows to its stockholders.
The share buyback underlines Omnicare’s strategy to increase shareholder value in the long run. The announcement is not only expected to reinforce shareholders’ confidence but also to boost the market value of the outstanding shares.
Omnicare is a market leading provider of long-term care pharmacy services and health care environment for individuals directly and indirectly, through subsidiaries, across North America. It competes with PharMerica Corporation (PMC - Snapshot Report) and National Healthcare Corp. in certain niche segments.
Omnicare’s business model ensures that it is well placed to sustain profitability in the long-run. Its performance in the most recent quarter negated external pricing pressure and reimbursement cuts. Moreover, generics coming to the market in the next few quarters present a major opportunity due to the company’s direct access to manufacturers and current greater exposure to the institutional pharmacy channel than in the past couple of years.
The stock currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.