CCE to Boost Shareholder Value - Analyst Blog

Coca-Cola Enterprises Inc. (CCE), in an endeavor to augment shareholders'  worth and inspire confidence in the company's value and prospects, announced a share buyback of approximately $1 billion of its common stock within the next 18 months.

At a price of $23.89 each, the current authorization represents approximately 41.86 million shares. At the close of the transaction of the sell-out of its North American operation, Coca-Cola Enterprises had approximately 347 million fully diluted shares outstanding. The fourth quarter of fiscal 2010 is scheduled to see the beginning of the buy-back exercise.

This plan is intended to be financed by existing cash, cash from future operations and incremental debt. Coca-Cola Enterprise's continuous effort to increase shareholder wealth through share repurchase announcements is reflective of the company's ability to generate strong cash flow.

At the close of the transaction of the sell-out of its North American operation, the company had cash and cash equivalents $475 million, representing  the fact that the company has a healthy cash position and the ability to enhance shareholders' value. The company also had $1.9 billion of net debt.

Coca-Cola Enterprise also announced that it expects to reward shareholders with a dividend of 12.5 cents in the fourth quarter of fiscal 2010. After paying 9 cents a share as dividend for 3 consecutive quarters, Coca-Cola Enterprise snapped the trend recently by boosting the quarterly dividend by 3.9%.

The company had last raised its dividend on March 10, 2010. A hike in dividend portrays Coca-Cola Enterprise's commitment to its shareholders to keep the dividend growing at a reasonably steady pace.

Coca-Cola Enterprises commands an industry leading return on equity; its trailing twelve months' return on equity of 95.6% surpasses the industry return on equity of 10.7%. The company's dividend payout ratio stands at 20.7%.

Coca-Cola Enterprises shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation for the stock remains Neutral.