Viacom to start quarterly dividend

Unveils shareholder returns at annual meeting

NEW YORK -- Viacom Inc. is making a commitment to returning some of its cash to shareholders, including chairman Sumner Redstone and his holding company National Amusements.

Viacom's board has approved the launch of a quarterly cash dividend of 15 cents per share beginning with the current quarter. The decision comes as big media and entertainment companies have increasingly focused on returning cash to shareholders. The first dividend will be payable on July 1 to stockholders of record at the close of business on June 21.

The dividend will cost Viacom an estimated $365 million a year, or roughly $270 million this year as the first quarter was still dividend-less.

Via NA, which formally owns most of Viacom's Class A voting shares, Redstone controls about 80% of the voting stock in Viacom. Combining those Class A shares with non-voting Class B shares that Redstone holds, his economic stake in the entertainment company amounts to about 7%, according to a THR calculation using data in regulatory filings.

The calculation shows that Redstone will get a direct dividend payout of about $231,000 a year from his Viacom Class B stock. If one adds in the dividend payments on his and NA's Class A stock, the amount goes up to about $25.3 mllion a year.

Viacom president and CEO Philippe Dauman announced the dividend decision, which some on Wall Street had long pushed for, at the company's annual meeting of stockholders at its headquarters here Wednesday. Viacom shares closed slightly higher.

The Viacom board has also authorized the resumption of a stock buyback program starting with the fourth quarter and increased the funds available for purchases of Class B common stock to $4 billion. It had suspended the program in early 2009 amid signs of a recession and the financial crisis.

"Viacom's quarterly cash dividend and the resumption of our long-standing stock purchase program demonstrate our commitment to return value to our stockholders and our confidence in Viacom's ability to deliver long-term, sustainable growth," said Dauman.

He emphasized that Viacom will also continue to invest "in our creative content engines." He said: "We are confident that our robust free cash flow generation will give us the flexibility to continue to simultaneously grow our operations and generate significant returns for our shareholders."

Analyst Dave Novosel at debt research firm Gimme Credit said the dividend and buyback shouldn't drain Viacom of too much cash. "With estimated free cash flow of $1.5 billion this year, the company can easily afford the payout," he said, adding he expects the firm not to spend more than its free cash flow on stock buybacks a year.

In a note to investors, Novosel did, however, raised concerns about the financial performance of Viacom's Paramount Pictures film unit, which management has lauded for being in the midst of a turnaround. Emphasizing that it has had operating losses in three of the last five quarters, he said the film division has had a "woeful performance."
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