Leading healthcare products maker Covidien plc (COV) has raised its quarterly dividend to 20 cents a share from 18 cents, representing an 11% growth. This lifts the annual dividend to 80 cents per share from the current payout of 72 cents. The revised quarterly dividend is payable on November 8, 2010, to shareholders of record as on October 4, 2010.
 
This represents the Ireland-based company’s second dividend hike over the past 12 months, underscoring its commitment to deliver incremental returns to investors leveraging a solid free cash flow and strong earnings power. Covidien continues to maintain a positive earnings surprise streak having beaten the Zacks Consensus Estimate in each of the last four quarters.
 
The company’s previous dividend increase was in September 2009, when it raised the quarterly payout by 12.5% to 18 cents a share from 16 cents. Subsequently, its board of directors had authorized the repurchase of shares worth up to $1 billion in March 2010. The company plans to return 25%–40% of its free cash flows in the form of dividend and share buybacks to shareholders annually.  
 
Covidien recently released an upbeat guidance for fiscal 2011. At an investor meet, the company stated that it envisions net sales for the year to budge up 6%–9% year over year. Moreover, free cash flows for fiscal 2011 have been forecasted to exceed $1.6 billion.
 
Covidien boasts a well diversified product and technology portfolio. Its core medical devices business faces competition from Johnson & Johnson (JNJ), Becton Dickinson (BDX) and C.R. Bard (BCR). Covidien remains committed to rolling out new products and technologies, focusing on faster-growing products and markets, and boosting market share in core segments through investments in sales and marketing infrastructure.
 
The acquisition of Endovascular devices maker ev3 Inc. in July 2010 has bolstered Covidien’s foothold in the peripheral vascular and neurovascular markets. The company recently divested its Specialty Chemicals and sleep therapy product line (includes continuous positive airway pressure and bi-level products). The divestitures enable Covidien to rationalize its product portfolio and reallocate resources to faster-growing, higher-margin businesses.
 
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COVIDIEN PLC (COV): Free Stock Analysis Report
 
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