McGraw-Hill Boosts Investor's Wealth - Analyst Blog
19 Januar 2012 - 1:00PM
Zacks
The McGraw-Hill Companies
Inc. (MHP), a publisher and provider of financial
information and media services, recently broke the news of a
dividend increase, reflecting its plan of utilizing its free cash
to enhance shareholders’ return, thereby boosting investors’
confidence in the stock.
Up Goes
Dividend
New Yorkbased company, McGraw-Hill,
stated a hike in its quarterly dividend by 2% to 25.5 cents from 25
cents a share. The increased dividend will be paid on March 12,
2012, to stockholders of record as of February 27, 2012.
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 9.6%
and is now among those S&P 500 companies (less than 25), which
have raised dividend annually for the 39th straight
year.
However, the news did not provide
much impetus to the stock, as the share price of McGraw-Hill crept
up 1.4% to close at $46.04 on Wednesday. Last year, the company had
raised its quarterly dividend by 6.4% to 25 cents.
Returning Values Now a
Common Trend
Dividend increases and share
repurchases have now become common trends among companies boasting
a stable cash position and healthy cash flows. These strategies not
only enhance shareholders’ return but also raise the market value
of the stock.
General Electric
Company (GE), which operates as a technology, service and
finance conglomerate globally, raised its quarterly dividend by
13.3% to 17 cents a share. Enbridge Inc. (ENB),
which transports and distributes crude oil and natural gas,
increased its quarterly dividend by 15% to 28.25 cents.
AXIS Capital Holdings Limited (AXS), a global
provider of specialty lines of insurance and treaty reinsurance,
announced a 4% increase in its quarterly dividend to 24 cents.
Recently, Target
Corporation (TGT), the operator of general merchandise and
food discount stores, announced a new $5 billion share repurchase
program. For-profit education company, Capella Education
Company (CPLA) also supplemented its existing share
repurchase authorization with an additional sanction of $50
million. The increase in the share buyback program was based on the
$34.8 million remaining at its disposal at the end of the third
quarter of 2011.
Financials &
Future
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
2011 with cash and cash equivalents of $1,437.6 million, and
generated free cash flow of $627.3 million during nine-month
period.
The company aims to create two
"focused companies” – McGraw-Hill Financial and McGraw-Hill
Education – with optimal-size capital and cost arrangement for
amplifying client commitment and improving strategic and economic
suppleness while increasing management’s focus and
responsibility.
Currently, we have a ‘Neutral’
recommendation on the stock. However, McGraw-Hill, which competes
with Pearson plc (PSO), holds a Zacks #2 Rank,
which translates into a short-term ‘Buy’ rating.
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
CAPELLA EDUCATN (CPLA): Free Stock Analysis Report
ENBRIDGE INC (ENB): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
PEARSON PLC-ADR (PSO): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
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