A Well Thought Out Dividend - Accenture (ACN)

Strong cash flows at global consulting giant Accenture (ACN) make it a stock for dividend investors to consider if you are looking for a diversified company with exposure to a spread of different industries.

The company which provides consulting in the fields of business management, technology and outsourcing is represented in more than 120 countries. Sectors which the business is prominent include healthcare, communications, financial services, public services and resources.

Reporting full year results for the year ended 31 August 2010, operating cash flow came in at $3.09bn while free cash flow was $2.85bn.

This reflected in a 20% increase in the company’s previous semi-annual dividend, declared in March and the ability of the company to spend $667m for 17.1 million shares repurchased on the open market in the fourth quarter (average price of $39 per share). During the full fiscal year 2010, Accenture (ACN) repurchased or redeemed 51.8 million shares for a total of $2.07bn (average price $39.96, representing about 7.5% of shares in issue).

This puts the stock on a price to earnings (PE) multiple of 17 times earnings and a 2.5% dividend yield.

Asked for guidance for full-year 2011, the company has indicated that it sees further improvement in terms of economic activity and says it expects net revenue growth to be in the range of 7 to 10 percent in local currency while earnings per share growth is to be in the range of 13 to 16%. The company has consulting bookings valued at about $3.5 billion.

One of the strengths of Accenture (ACN) is that it is well diversified and is not overly exposed to a single sector and enjoys a strong global geographic footprint.

This is reflected in its revenues for the fourth quarter which saw communications ($1.1bn), financial services ($1.1bn), health and public services ($856m) and resources ($1bn) deliver a fairly equal slice of the pie.

Until September, shareholders in Accenture (ACN) had enjoyed pretty muted returns. The company kicked off 2010 trading at around $38, rising to $44 in April before giving back these gains between June and September. However the share rose smartly from below $38 back to above $44 over the course of the last month on the back of an improved operating outlook.

While a dividend investor might need more than a 2.5% yield to get themselves excited, it’s hard to turn your nose up at the strong and diversified cash flows which Accenture (ACN) is delivering.