McGraw Hill Financial, Inc. is an intriguing option for investors seeking both growth and income, as the shares of this financial information provider rose 1.4% after the company announced a dividend hike on Jan 29, 2014. The news of the dividend hike reflects this Zacks Rank #2 (Buy) stock’s plan of utilizing free cash to enhance shareholders’ return, thereby boosting investors’ confidence in the stock.
The N.Y. - based company, raised its quarterly dividend by 7.1% to 30 cents (or $1.20 annually) from 28 cents a share (or $1.12 annually). The increased dividend will be paid on Mar 12, 2014, to stockholders of record as of Feb 26. The dividend yield based on the new payout and the last closing market price is approximately 1.6%.
In Jan 2013, the company last increased its quarterly dividend by 9.8% to 28 cents. Other companies that recently increased quarterly dividend include Enterprise Products Partners L.P. (EPD - Analyst Report) and Family Dollar Stores Inc. . The companies raised their dividends by 6.1% to 70 cents and 19.2% to 31 cents, respectively. Another company, Omega Healthcare Investors Inc. (OHI - Snapshot Report) recently hiked its dividend by 2.1% to 49 cents.
McGraw-Hill started distributing dividends way back in 1937. Since 1974, the company has boosted its dividend at a compound annual dividend growth rate of around 9.5%, and now counts among the S&P 500 companies (less than 25), which have raised dividend annually for the 41 years straight. Since 2011, the company has returned over $4 billion to stockholders via dividends and share buybacks, comprising approximately $1.3 billion paid in 2013.
Dividend hikes not only enhance shareholder’s return but raise the market value of the stock. Through this strategy, the companies bolster investor confidence in the stock, thereby persuading them to either buy or hold the scrip instead of selling them.
A dividend hike primarily reflects the company’s sound financial position and defined future prospects. This is quite evident from McGraw-Hill’s balance sheet and cash flow positions. The company ended the third quarter of 2013 with cash and equivalents of $1,577 million, and generated free cash flow of $388 million during the nine-month period.