McGraw-Hill Enhances Return - Analyst Blog

The McGraw-Hill Companies Inc. (MHP), a publisher and provider of financial information and media services, hit the market with the news of dividend increase, reflecting its plan to utilize its free cash to enhance shareholders' return, thereby boosting investor confidence in the stock.

New York-based McGraw-Hill, raised its quarterly dividend by 6.4% to 25 cents from 23.5 cents. The increased dividend will be paid on March 10, 2011, to stockholders of record as on February 24, 2011.

McGraw-Hill has regularly paid dividends since 1937. Since 1974, the company has boosted its dividend at a compound annual dividend growth rate of around 10% and is now among those S&P 500 companies (less than 25), which have raised its dividend annually for the 38^th straight year.

With signs of recovery in the economy, share repurchases and dividend increases have now become common trends among companies sitting on surplus cash. These strategies not only enhance shareholders' return but also boost earnings per share and raise the market value of the stock.

Increase in dividend, reflects the company's sound financial position and well-defined future prospects. McGraw-Hill has been gaining strength on the heels of robust performance across Standard & Poor's (S&P's) services, U.S. elementary-high school and higher education markets, and global energy information products.

This is quite evident from McGraw-Hill's last reported quarter results. The company's third-quarter 2010 earnings of $1.22 per share topped the Zacks Consensus Estimate of $1.09, and rose 14% from $1.07 posted in the prior-year quarter. Total revenue of $1,979.8 handily beat the Zacks Consensus Revenue Estimate of $1,946 million, and jumped 5.5% from the year-ago quarter.

McGraw-Hill expects fiscal 2010 earnings to be at the high-end of the new guidance range of $2.60 to $2.65 per share versus $2.55 to $2.65 provided earlier.

Currently, we have a Neutral rating on the stock. Moreover, McGraw-Hill, which competes with Pearson plc (PSO), holds a Zacks #3 Rank, which translates into a short-term Hold rating, and correlates with our long-term recommendation.

 
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