How Mead Johnson Rewards Its Shareholders



Mead Johnson’s dividend history

Mead Johnson Nutrition (MJN) has a strong history of returning cash to its shareholders. Since 2009, the company has generated $5.9 billion of cash in total. Between fiscal 2010 and 2014, the company has returned $1.5 billion to its shareholders in the form of dividends and share repurchases.

Dividends per share from Mead Johnson have grown at a compound annual growth rate of 13.6% over the period between fiscal 2010 and 2014. In fiscal 2014, the company paid $1.5 per share in dividends, which represents a year-over-year increase of 10.3%. This is the fifth consecutive year of double-digit dividend increases. The company expects to maintain these current dividend levels in 2016.

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Mead Johnson’s share repurchase program

The company has announced a new share repurchase program of $1.5 billion—$1 billion of which is expected from its Accelerated Share Repurchase program, and $0.5 billion of which would come from its open-market share repurchase program over time.

Mead Johnson expects to finance these program through the issuance of debt. The company has already issued a short-term loan of $1 billion in accordance with the Accelerated Share Repurchase program. At the end of 3Q15, which ended September 30, 2015, the company had a total debt of $1.8 billion (not including the short-term loan mentioned above).

Peer group comparisons for Mead Johnson

In fiscal 2014, Mead Johnson had a dividend payout ratio of 42.2% and a dividend yield of 1.5%. Nestlé SA (NSRGY), by comparison, had a dividend payout ratio and a dividend yield of 48.7% and 3%, respectively, whereas Abbott Laboratories (ABT) had a ratio and yield of 77.5% and ~2%, respectively.

Mead Johnson’s dividend outlook

In fiscal 2014, Mead Johnson paid a dividend of $1.50 per share in fiscal 2014. It plans to pay a dividend of $1.64 per share and $1.78 per share in fiscal 2015 and 2016, respectively. The company’s estimated dividend payout ratio in fiscal 2015 and 2016 were 48.4% and 49.9%, respectively.

By 3Q15, which ended September 30, 2015, MJN had paid a dividend of $1.24 per share. MJN has a weight of 0.09% in the S&P 500 Index (SPY) and of 0.93% in the Consumer Staples Select Sector SPDR ETF (XLP). Food and beverage companies make up 18.6% of the portfolio holdings of XLP.

Continue to the next part for an analysis of Mead Johnson’s recent stock performance.


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