Omar Ishrak will begin his era at Medtronic Inc. (NYSE:MDT) by trying to boost the company’s sagging stock price, initiating a program to buyback some 75 million shares of MDT stock and increasing the cash dividend the company pays to shareholders by 8 percent.
Medtronic has seen its share price drop by 11 percent since hitting a high water mark for 2011 of $43.20 on May 18, a week after Ishrak was named the company’s new chief executive officer.
“These actions highlight the confidence of both the board of directors and our management team in the long-term strength of the company’s cash flow generation and ongoing commitment to return capital to our shareholders,” Ishrak said in a prepared release. “We remain committed to our shareholders, expecting to return 40 to 50 percent of our free cash flow each year through dividends and share repurchases while making disciplined, strategic investments for sustainable, long-term growth.”
Buying back shares, a move typically done when a company feels the share price doesn’t accurately reflect its true value, is nothing new for Medtronic. Over the past six years, the company has repurchased more than $9 billion of common stock.
The Street has been less than enamored with shares of the Minneapolis, Minn.-based medical device giant. Recently, Moody’s Ratings Service lowered its outlook on the company to negative, while reaffirming the company’s overall credit rating.
The move, which doesn’t impact MDT’s ability to get credit, is seen as a sign that Wall Street believes Medtronic is facing some strong headwinds in its core businesses.