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Omnicom Group (OMC) Hikes Quarterly Dividend Payout by 9.1%

Global marketing and corporate communications company Omnicom Group Inc. OMC hiked its quarterly dividend payout by 9.1% year over year to 60 cents per share or $2.40 on an annualized basis. The proposed dividend is payable in January 2018.

Steady dividend payout and share repurchases back the long-term strategy of Omnicom to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been the company’s key features.

As the second biggest global advertising and marketing service agency group, Omnicom has an extensive geographic footprint, high client retention, along with a huge and diverse customer base. The company reported relatively healthy third-quarter 2017 results on modest organic growth. Net income for the reported quarter was $286.9 million or $1.13 per share compared with $278.2 million or $1.06 per share in the year-ago quarter. The year-over-year increase in earnings despite lower revenues was primarily due to a fall in operating expenses. Earnings for the reported quarter beat the Zacks Consensus Estimate by 3 cents.

Revenues declined 1.9% year over year to $3,719.5 million but exceeded the Zacks Consensus Estimate of $3,713 million. Acquisitions, net of dispositions, led to a 5.7% decrease in revenues, partially offset by favorable foreign exchange rate impact of 1% and organic growth of 2.8%.

Across regional markets, North America revenues reduced 6.5% year over year to $2,107.5 million. Asia Pacific recorded a 1.8% decrease in revenues to $411.2 million, Euro & Other Europe improved 11.7% to 660.1 million while the U.K. recorded a 2.8% improvement to $357.6 million. Revenues from Latin America saw an increase of 4.6% year over year to $117.7 million while that from Middle East and Africa declined 2.7% to $65.4 million.

For the 12 months ended Sep 30, 2017, return on invested capital and return on equity aggregated 20.2% and 48.9%, respectively. During the period from 2007 through Sep 30, 2017, Omnicom distributed 106% of net income to shareholders through dividends and share repurchases.

Omnicom has a track record of strengthening its business and expanding its global client base through acquisition of complementary companies to fend off competition from rivals like The Interpublic Group of Companies, Inc. IPG, Clear Channel Outdoor Holdings, Inc. CCO and National CineMedia, Inc. NCMI. We remain encouraged by dividend hike, healthy quarterly results and its acquisition spree.

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