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August 16, 2010
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Leading pharmaceutical care provider Omnicare Inc (OCR) increased its quarterly dividend by a penny to 3.25 cents per share, representing a roughly 44% growth over the earlier quarterly rate of 2.25 cents. This raises the annual dividend to 13 cents per share from the current payout of 9 cents. The revised quarterly dividend is payable on Sep 15, 2010 to shareholders of record as of Aug 31, 2010.
The dividend increase represents good news for investors, especially after the company’s tepid second-quarter fiscal 2010 results that came below expectations. Omnicare’s second quarter revenue and earnings both missed the Zacks Consensus Estimate. Revenue from its core Pharmacy Services segment dipped year over year, partly due to lower prescription volumes stemming from a fall in occupancy rates, reduced utilization trends and a lower number of beds served.
However, Omnicare boasts a reasonably sound balance sheet with cash and cash equivalent having gone up 44% year over year in the second quarter while debt-to-capital ratio came down to 36% from 37.2% a year-ago. The company authorized a fresh $200 million share repurchase program during the second quarter, representing another commitment to boost shareholder returns.
Omnicare is a market leader in an industry that is essential to serving the needs of the population seeking long-term care. The company has reduced costs and increased efficiency through its “Full Potential Plan (FPP)", a program designed to optimize resources across the organization.
However, the benefits of the FPP are partly masked by pressure from reimbursement cuts on generic drugs. Nevertheless, in the longer term, Omnicare will be able to offset some of these reimbursement exposures through synergies from restructuring efforts. Moreover, market entry of several generic products over the next few quarters represents a substantial opportunity given Omnicare’s higher exposure to the institutional pharmacy channel.
Read the full analyst report on "OCR"
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