FedEx Raises Quarterly Dividend - Analyst Blog

FedEx Corp. FDX has raised its quarterly dividend by 5 cents per share to 20 cents.  The increased dividend is payable on July 3 to stockholders of record on June 19. The current dividend hike represents a consecutive return to customers following last year's increase by a penny.

We believe FedEx's focus on enhancing investor return is bolstered by strong financial strength achieved on the back of healthy operational efficiency across all its segments. The company expects earnings of $2.25 to $2.50 per diluted share in the fourth quarter and $6.55 to $6.80 per diluted share for fiscal 2014. The company is counting on its profitability improvement to support its high earnings estimates. We expect this earnings growth to, in turn, support higher returns to the shareholders.

Besides the dividend payout, FedEx is also considering undertaking its share repurchase program. During the first nine months of fiscal 2014, the company repurchased 15.6 million shares for $2 billion. As of Feb 28, 2014, the company had repurchase authorization existing for 15.2 million shares.

Following a buyback program for 32 million shares initiated in Oct 2013, the company entered into an accelerated share repurchase agreement with two banks in Jan 2014 to buy back an aggregate of $2.0 billion worth of its shares. Under this agreement, the company received 11.4 million shares till the third quarter of fiscal 2014.

We believe such initiatives, besides adding value to investors, also help to foster the market valuation of FedEx. This naturally provides the company a competitive advantage over other players like United Parcel Service, Inc. UPS, Expeditors International of Washington Inc. EXPD and Radiant Logistics, Inc. RLGT.

FedEx currently has a Zacks Rank #3 (Hold).