Global marketing and corporate communications company Omnicom Group Inc. (OMC) recently increased its dividend payout by 33.33% year over year to a quarterly payment of 40 cents per share or $1.60 on an annualized basis. The first quarter 2013 dividend is payable on Apr 2 to shareholders of record as of Mar 5.
Based on the closing price of $56.02 on Feb 12, 2013, the proposed dividend affirms a yield of 2.1%. A steady dividend payout facilitates the long-term strategy of Omnicom to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
The company had earlier hiked its dividend in first quarter 2012, when it raised the quarterly dividend payout from 25 cents to 30 cents per share or from $1.00 to $1.20 on an annualized basis. Prior to that, Omnicom raised its quarterly dividend in first quarter 2011 from 20 cents to 25 cents per share, and in first quarter 2010 from 15 cents to 20 cents.
The company also has a share repurchase program in place, under which it repurchased shares worth $832 million in 2012. Omnicom has consistently returned significant cash to its shareholders. In the 10-year period from 2002 to 2012, Omnicom distributed over 99% of net income to shareholders through dividends and share repurchases.
The recent dividend hike follows strong quarterly and annual results that helped the company to comprehensively beat the Zacks Consensus Estimates. The company also has a healthy liquidity position. Cash and short-term investments aggregated $2,699 million at year-end 2012, while free cash flow for the year was $1,426.1 million.
Omnicom has a strong track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well diversified geographically and benefits largely from the growing markets. In addition, the company’s efforts in maintaining controlled expenses and strong global reputation are commendable.
However, the company needs to be wary of stiff competition from other players in the industry such as Harte-Hanks Inc. (HHS) and Publicis Groupe SA (PUBGY), carrying a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively. Another competitor worth mentioning is AirMedia Group Inc. (AMCN). Omnicom presently has a Zacks Rank #3 (Hold).