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Analyst Blog

West Pharmaceutical Services (WST - Snapshot Report) recently increased its quarterly cash dividend by 1 cent per share to 19 cents per share, beginning in the fourth quarter of 2012. The increased dividend will be paid on November 7, 2012, to stockholders of record as of October 24, 2012.

The announcement marks the nineteenth successive annual increase in West Pharmaceutical’s quarterly dividend. The company’s commitment to returning wealth to its shareholders reflects the strength of its cash generation capabilities.

West Pharmaceutical is characterized by a capital structure which generates adequate liquidity to fund research and development expenditure and pay dividends. Innovation at West Pharmaceutical is backed by high research and development, with associated expenditure seen as imperative for maintenance of competitive advantage. The increase in dividend should boost investor confidence and drive share value.

West Pharmaceutical, which has ascended in price as of late, currently has a dividend yield of 1.4% and a payout ratio of 26.3%. Based on these metrics and the revision of 2012 earnings guidance to a range of $2.60 to $2.70, up from $2.50 to $2.67, the company is adequately placed to generate lucrative returns to shareholders.

West Pharmaceutical, which competes with 3M Co. (MMM - Analyst Report) and Rexam plc. (REXMY) in certain niches, currently has a short-term Zacks #2 Rank (Buy rating). The company, a global leader in the provision of drug administration systems and components for packaging as well as delivery of injectable drugs and delivery system components across various industries, has a significant competitive advantage in the market it serves.

Additionally, it continues to make headway into new geographies to expand its business. The company opened two new plants in China and India in an effort to meet the dynamic and burgeoning market demand, especially in the Asia-Pacific region. However, macroeconomic pressure across the globe remains a headwind.

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