Buoyed by a healthy financial position and robust outlook of  Whole Foods Market, Inc.'s (WFMI), the company's Board of Directors has reinstated the quarterly dividend after a hiatus of more than two years. The Board approved a quarterly dividend of 10 cents a share.

Management said that the dividend will be paid on January 20, 2011 to shareholders of record as on January 10, 2011, and will amount to approximately $17 million on a quarterly basis or approximately $69 million annually.

Austin, Texas-based Whole Foods, suspended its dividend in August 2008 to better manage its liquidity in the wake of a challenging economic environment. The company had at that time witnessed a 31.4% drop in its third quarter earnings per share.

During fiscal 2010, Whole Foods generated operating cash flows of $585.3 million and incurred capital expenditures of $256.8 million, which resulted in free cash flows of $328.5 million.

The company ended the year with cash and cash equivalents, restricted cash, and investments of $644.7 million, and total debt of $508.7 million. Following the fourth quarter results, Whole Foods paid down $100 million of its term loan scheduled to mature in August 2012, with $390 million still outstanding.

For fiscal 2011, Whole Foods now expects an increase of 10%-12% in total sales, driven by a 5.5%-7.5% rise in comparable-store sales and a 5%-7% growth in identical-store sales. The company guided earnings in the range of $1.66 to $1.71 per share, and anticipates capital expenditures between $350 million to $400 million for the year. The company had previously forecasted earnings in the range of $1.59 to $1.64 per share.

Currently, we have an Outperform rating on Whole Foods. Moreover, the Zacks #1 Rank, which translates into a short-term Strong Buy recommendation, correlates with our long-term view.