GameStop Corp. (GME:US), the largest video- game retailer, rose 5.5 percent after the company boosted its dividend by 67 percent and said it will buy back more stock following a drop in second-quarter earnings.
GameStop, based in Grapevine, Texas, rose to $17.98 at the close in New York. The shares have dropped 16 percent in the 12 months amid declining sales as video-game users reduced spending on stores and shopped online.
The quarterly dividend will increase to 25 cents a share, from 15 cents, giving the stock an indicated yield of 5.6 percent, according to data (GME:US) compiled by Bloomberg. GameStop plans to return essentially all of its free cash flow to shareholders in the future, executives said today on a conference call (GME:US).
“We don’t see anything significant on the short-term horizon that’s going to change our approach to capital allocation,” Chief Financial Officer Robert A. Lloyd said on the call. “So you can expect that we’ll continue to return 100 percent-ish of our free cash flow to shareholders.”
The company has about $300 million left on a share repurchase authorization and plans to “continue to be active in the stock-buyback market going forward,” Lloyd said.
The shares may also be advancing on prospects for the new Wii U game machine from Nintendo Co., according to Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles who has an outperform, or buy, recommendation on the stock.
Second-quarter net income slid to $21 million, or 16 cents a share, from $30.9 million, or 22 cents, a year ago, the retailer said today in a statement (GME:US). Analysts expected 15 cents, the average of estimates compiled by Bloomberg.
Sales have slumped for five straight quarters, and the company is expanding into resales and repairs of Apple Inc. (AAPL:US) products to add revenue. Revenue in the quarter ended July 28 fell 11 percent to $1.55 billion, hurt by a lack of new game releases, GameStop said. Analysts projected $1.6 billion.
U.S. retail sales of video-game hardware, software and accessories fell 20 percent in July to $548.4 million, researcher NPD Group Inc. said this month.
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