Medical technology major, St. Jude Medical Inc. (STJ - Analyst Report) has hiked its quarterly dividend by 9% to 25 cents a share from 23 cents. This lifts the annual dividend to $1.00 per share from the current payout of 92 cents and equates to a dividend yield of roughly 2.4%. The revised quarterly dividend is payable on Apr 30, 2013, to shareholders of record as on Mar 29, 2013.
This represents the company’s 2nd annual dividend increase since its inception in Feb 2011. The company’s previous dividend increase was in Feb 2012, when it raised the quarterly payout by 10% to 23 cents a share from 21 cents.
Its peers Stryker Corp. (SYK - Analyst Report) and Medtronic Inc. (MDT - Analyst Report) also pay regular dividends to its shareholders. Both Medtronic and Stryker increased their quarterly dividends by 7% and 25%, respectively, in 2012.
St. Jude projects revenue growth for 2013 to be dismal due to an extremely challenging healthcare environment and a soft CRM market. Hence, it has turned its focus on cost savings, restructuring, dividends and share repurchase programs to boost its bottom line.
The Minn.-based company’s board, in Nov 2012, authorized a new share buyback program, allowing it to repurchase up to $1 billion of its common stock. The company bought back 27.7 million shares of its common stock for $1.1 billion in 2012.
The dividend increase along with the share buyback program underscores St. Jude’s commitment to deliver incremental returns to investors leveraging a solid balance sheet, healthy free cash flow and earnings power. The company’s solid balance sheet allows it to support the dividend hike. St. Jude exited the fourth quarter of 2012 with cash and cash equivalents of $1,194 million, a year-over-year increase of roughly 21.1%.
St. Jude is consistently producing positive earnings surprises over the past several quarters. The company has managed to surpass the Zacks Consensus Estimate in the last four quarters with an average earnings surprise of 2.36%.The current Zacks Consensus Estimates for the first quarter and the full year 2013 are 91 cents and $3.70, respectively.
St. Jude currently carries a Zacks Rank #3 (Hold). While we remain on the sidelines regarding St. Jude, medical products companies such as Nuvasive Inc. (NUVA - Snapshot Report) with a Zacks Rank #1 (Strong Buy), is expected to do well.