CBS Corp. Increases Dividend, Stock Buyback Program

Leslie Moonves - Getty - 2016
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The company, led by chairman and CEO Leslie Moonves, is boosting its quarterly dividend by 20 percent, rewarding shareholders amid recent Wall Street talk about a possible recombination with Viacom.

CBS Corp. is increasing its quarterly dividend and stock buyback program.

The company run by CEO Leslie Moonves announced the news Thursday before the stock market opened.

The company's dividend will rise by 20 percent to 18 cents per share, compared with 15 cents so far. The new rate will take effect on the next scheduled quarterly dividend payment date of Oct. 1, 2016, and be in effect for shareholders of record as of Sept. 9.

CBS Corp. also said that it was increasing its stock buyback program to $6 billion from a remaining authorization of $1 billion, under its previous program, as of mid-year.

Dividends and stock repurchases are seen as shareholder-friendly moves. Buybacks show a management team's confidence that a company's stock is undervalued, and they raise companies' earnings per share. But critics of the idea of buybacks say companies should instead spend money on dividends or investments in their businesses.

Media and entertainment companies have repeatedly increased their dividends and buybacks in recent years. Dividends in the past were sometimes seen as a mainstay of more mature businesses with little growth upside.

CBS Corp.'s moves also mean the company is putting aside cash to reward shareholders that it won't spend on acquisitions. Some on Wall Street have suggested that CBS and Viacom could merge again as both are controlled by Sumner Redstone, who, along with his daughter Shari, has been in a showdown with Viacom's management, led by CEO Philippe Dauman.

Some analysts have said though that CBS investors would likely not want to see a deal. Sanford C. Bernstein analyst Todd Juenger recently wrote in a report: "Even if the CBS board and management can be convinced to acquiesce to acquiring Viacom, we don't think it would be good for either stock. We don't think Viacom shareholders would be paid a premium, and we think CBS shareholders are better off with the company they currently have, compared to the risk-adjusted hope of 'fixing' Viacom and capturing that value."

CBS Corp. is set to report its second-quarter earnings after the market close on Thursday. Its stock was down minimally in early Thursday trading.

"We do not think this morning's announcement is an indication that earnings will miss tonight," said Wells Fargo analyst Marci Ryvicker after the news. "It is probably just a timing thing and might as well get the capital returns announcement ''out of the way'' so we can focus on the numbers this evening."