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CBS Corp. on Thursday said it planned to buy back $3 billion worth of shares by the end of 2014 and boost its dividend, bringing its cash returns to shareholders closer to the higher level of its media rivals.
Shares rose $1.46, or 4.7 percent, to $32.57 in midday trading.
The new buyback authorization, which adds $1.7 billion to the $3 billion approved already, suggests the company will buy back about $1.24 billion worth of stock every year going forward, said Benjamin Swinburne, an analyst with Morgan Stanley.
Since the buyback plan was started in January 2011, CBS has spent $1.7 billion buying back non-voting Class B shares.
Media companies tend to generate a lot of cash, while capital expenditures are fairly low. Investors have pressured the companies to return that cash to shareholders in the form of share buybacks or dividends rather than make speculative acquisitions.
Despite the increase, CBS's buyback plan is still slower than some of its peers.
The Walt Disney Co. bought back $5 billion worth of shares in the year to Oct. 1 last year and $1.67 billion in the half year through March.
News Corp. has bought back $4.89 billion worth of shares since last July and plans to buy back another $5.1 billion by next June. Time Warner Inc. bought back $4.9 billion in stock from Jan. 1, 2011 to Feb. 3, 2012.
In addition to the share buybacks, CBS is raising its quarterly dividend to 12 cents per share from 10 cents as of Oct. 1. That restores some of what was lost after the company slashed its dividend from 27 cents per share in December 2008 to 5 cents per share in March 2009 in the depths of the recession.
The new dividend is more in line with peers. Disney pays an annual dividend that works out to 15 cents per share each quarter, while Time Warner paid 26 cents per share in the quarter through March. News Corp. paid a semi-annual dividend in March that works out to 4.25 cents per share each quarter.