After weathering blows from some shareholders in recent months criticizing its management and its future business prospects, Comcast came out swinging Thursday morning, unveiling a plan that involves significantly increasing its share buyback program and issuing a small cash dividend to shareholders for the first time in nearly 10 years.
Comcast said during a conference call with analysts to discuss fourth-quarter results that it will issue a 6-cents per share dividend to qualified shareholders, beginning in April. The annual dividend will be about 25 cents per share.
“We expect the dividend will increase over time,” said chairman and CEO Brian Roberts on a conference call with analysts.
In addition, Comcast said that it will use the remaining $6.9 billion in availability from its current share repurchase authorization by the end of 2009, with half of that being spent to buy back stock this year. By contrast, Comcast repurchased about $3.1 billion of its own stock in 2007, $1.25 million in the fourth quarter alone.
All in, Comcast said the plan would return $750 million to shareholders annually, representing about one-third of the $2.3 billion in free cash flow the company generated in 2007.
The news appeared to please investors, who boosted the stock price by more than 7% ($1.25 per share) in early trading Thursday to $19.06 each.
Investors have been awaiting a dividend ever since chief financial officer Mike Angelakis hinted that the cable giant was considering one at an industry conference in December. While some analysts had hoped that the dividend would be bigger – some expected a cash payout representing a 3.5% yield, or more than double the 1.4% yield of the announced dividend – but the accelerated share buyback should more than make up for that difference.
In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett estimated that the dividend and share repurchase program combined represented an 8% yield.
Investors were hoping … even expecting … a dividend,” Moffett wrote. “What they got is likely better.”