Supervalu Inc. (SVU) announced a share repurchase program, and declared a regular quarterly dividend.
The company’s Board authorized the grocery chain to buyback about $70 million of shares through June 30, 2011. Stock repurchases will be made primarily through cash generated from the settlement of stock options. This new repurchase program replaces the existing $70 million buyback program authorized in May 2009. Under the previous plan, the company had repurchased about 220,000 shares for $2.9 million.
At the same time, the company approved a regular quarterly dividend of 8.75 cents a share, implying an annual divided of 35 cents. The dividend will be paid on September 15, 2010 to stockholders of record as of September 1, 2010. As of June 18, 2010, there were approximately 212.1 million shares outstanding.
With the revival of the economy, share repurchases and dividend pay outs have become the practice to enhance share holders’ value. These strategies not only enhance shareholders’ return but also boost earnings per share and raise the market value of the remaining shares. The company had cash and cash equivalent of $211 million at the end of fiscal 2010.
Based in Eden Prairie, Minnesota, Supervalu expects pro forma earnings in the range of $1.75 to $1.95 per share in fiscal 2011, in line with the Zacks Consensus Estimate of $1.78.
Supervalu, which operates more than 2300 traditional and hard-discount retail food stores, maintains a Zacks #4 Rank, which translates into a short-term ‘Sell’ recommendation, but our long-term recommendation for the stock is Neutral.
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