NEW YORK (Reuters) - Xerox Corp <XRX.N> said on Monday that it would pay its first quarterly dividend since 2001 and issued a strong earnings forecast for the next two years, citing demand for digital color printing and services.
By Franklin Paul
NEW YORK (Reuters) - Xerox Corp <XRX.N> said on Monday that it would pay its first quarterly dividend since 2001 and issued a strong earnings forecast for the next two years, citing demand for digital color printing and services.
The news sent shares of the office equipment company, which scrapped payouts more than six years ago as it tried to return to profitability, up as much as 3.4 percent.
Xerox, the world's biggest supplier of office printers and related services, declared a quarterly dividend of 4.25 cents a share. It said the reinstated payout reflected the health of its business.
!ADVERTISEMENT!Over the past two years, Xerox, the leader in digital production color printing, has been gaining market share at the expense of rivals such as Hewlett-Packard Co <HPQ.N> and Eastman Kodak Co <EK.N>.
"We've significantly strengthened our financial position, providing flexibility for investing in our business and delivering shareholder returns," Xerox Chief Executive Anne Mulcahy said in a statement on Monday.
Xerox has bet on the introduction of color printers, along with lucrative long-term supply and service deals to its commercial printing customers. Gross profit for color printed pages is five times greater than from black-and-white.
Analyst Shannon Cross of Cross Research, commenting on the reinstated dividend, write in a research note, "We believe this is a big step for the company in its turnaround. We think this move reflects the board's confidence in the stability of cash flow generation and is an important statement in light of recent questions surrounding impacts to tech from a potential slowdown in the economy."
Cross estimated the dividend would cost Xerox about $160 million annually. She expects the company to raise the payout over time "as cash flow generation holds steady to increases."
Stamford, Connecticut-based Xerox, which held an analysts' day in New York on Monday, forecast profit of $1.31 to $1.35 per share for 2008 and $1.45 to $1.50 per share for 2009. Analysts' average forecasts are $1.31 for 2008 and $1.43 for 2009, according to Reuters Estimates.
Xerox stood by its forecast for 2007 earnings of $1.18 to $1.20 per share.
STOCK RISES
By 2001, Xerox had lost its luster as a technology innovator, and its stock price had withered because of speculation about accounting irregularities and growing competition in the imaging industry.
In July of that year, the company eliminated its quarterly dividend for the first time since its inception in 1948.
News of the resumption could renew investor interest in Xerox shares, which in the past week have slipped to near 52-week lows.
Analysts have also cited prospects for new products, such as the company's solid-ink system, which promises to slash the cost of color printing for high-volume users willing to pay more initially for machines.
Experts credit Xerox with impressive additions to its office printer lines and solid profitability. But analysts have been disappointed by tepid sales gains -- 2006 revenue of $15.9 billion was up only about 3 percent from 2003.
Xerox reiterated that it expects revenue to rise 1 percent to 2 percent this year, 3 percent in 2008, and 3 percent to 5 percent in 2009.
Profit margins in those years are expected to stay at 40 percent to 41 percent, it said.
Mulcahy said the company would continue buying back stock, building on $2 billion in share repurchases in the last two years.
The quarterly dividend is payable January 31 to shareholders of record on December 31.
Xerox shares were up 29 cents to $16.11 in afternoon trade on the New York Stock Exchange after rising as high as $16.35 earlier in the session.
(Editing by John Wallace)
