CDW (CDW) Boosts Dividend; Approves New Buyback; Announces Strategic Investment
CDW (NASDAQ: CDW) announced three actions under its capital allocation strategy designed to provide both near and long-term returns to shareholders while enabling the company to invest in its future.
The company's announcements include the approval by its Board of Directors of a 59 percent increase in its quarterly cash dividend and authorization of a new $500 million share repurchase program, as well as its entry into a definitive agreement to acquire a minority stake in UK-based IT solutions provider, Kelway. These actions reinforce CDW's refreshed capital allocation priorities, which include:
- Increase dividends annually, with a target to achieve a dividend payout of 30 percent of free cash flow over the next five years
- Ensure the right capital structure, with a target to maintain net debt/adjusted EBITDA leverage in the range of 2.5 to 3.0 times
- Supplement organic growth with strategic tuck-in acquisitions
- Return excess cash after dividends and M&A to shareholders via share repurchases
"Today's actions reflect the confidence we have in our strategy and our ability to continue to deliver sustained, profitable growth and cash flows," said Thomas E. Richards, CDW chairman and CEO. "They also demonstrate our commitment to ensuring we continuously deliver enhanced value to customers, partners, coworkers and investors."
"As we approach our previously announced leverage target ratio of about 3.0 times, it is appropriate to update shareholders on our capital allocation strategy and refreshed priorities," said CDW's chief financial officer, Ann E. Ziegler. "When combined with expected operating performance, these priorities support our new medium-term targets starting in 2016, which include low double-digit annual earnings per share growth."
A quarterly cash dividend payment of $0.0675 per share will be made on December 10 to shareholders of record as of the close of business on November 25, 2014. On an annual basis, CDW's dividend per share is now $0.27 per share, up 59 percent from the previous annual dividend of $0.17 per share. Future dividends will be subject to Board approval.
The $500 million share repurchase program is effective immediately. CDW will repurchase shares utilizing a systematic approach and repurchases may be made from time to time in the open market or through privately negotiated transactions, depending on share price, market conditions and other factors. CDW intends to conduct any open market share repurchases in compliance with the safe harbor provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The share repurchase program does not obligate CDW to repurchase any dollar amount or number of its shares, and repurchases may be commenced or suspended from time to time without prior notice.
CDW's 35 percent investment in Kelway will enhance the company's ability to provide IT solutions to US-based multi-national customers. Based in the UK, Kelway is an integrated IT solutions provider with global supply chain relationships which enable it to conduct business in more than 100 countries. The investment will be accounted for as an equity method investment and is expected to be accretive beginning in the first year. Terms of the transaction were not disclosed.