MINNEAPOLIS, Minnesota — The directors of medical technology giant Medtronic today boosted their company’s quarterly stock dividend by 9 percent to 20.5 cents a share, or 82 cents a year. It was Medtronic’s 23rd annual dividend increase in a row and signaled the company’s “strong confidence” in its future growth.
Medtronic board members also increased their company’s authority to buy its stock on the open market by 60 million shares, or 5.4 percent of shares outstanding. Such a move usually aims at bolstering a company’s stock price and letting shareholders know it’s a good investment.
“Today’s actions demonstrate both the board of directors’ and management’s strong confidence in the long-term strength of the company’s cash flow generation and continued commitment to returning capital to shareholders,” said Bill Hawkins, chairman and chief executive, in a written statement.
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“Our ongoing commitment to return a minimum of 40 to 50 percent of our free cash flow to shareholders each year allows us to offer Medtronic investors enhanced returns through dividend increases and ongoing share repurchases, while also making disciplined, strategic investments for sustainable earnings growth,” Hawkins said.
In fiscal 2009, ended April 24, Medtronic generated $3.9 billion in net cash from operations. The company is returning $1.6 billion of that to shareholders in the forms of dividends and share repurchases, the company said.
When a company buys back its shares, it reduces the number of shares outstanding. That means its earnings are spread out over fewer outstanding shares, so earnings per share rise. Growth in earnings per share is part of what investors buy when they buy stock.
Medtronic’s quarterly dividend is payable July 31 to shareholders as of July 10. Medtronic shares were up 57 cents, or 1.73 percent, to $33.50 at 3:45 p.m. EDT.