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Instant Analysis: GNC Holdings Raises Its Dividend by 11%

By Eric Volkman – Feb 3, 2016 at 8:21AM

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The veteran nutrition supplements and vitamin retailer will pay $0.20 per share.

What happened?
Vitamin and supplements retailer GNC Holdings (GNC) has juiced its quarterly dividend. The company declared a payout of $0.20 per share, 11% higher than its previous rate.

This is becoming a tradition. Since initiating its quarterly distribution in early 2012, GNC Holdings has raised it at the beginning of each subsequent year. Over that time, it has nearly doubled from $0.11 per share to the present level.

The new dividend is to be handed out "on or about" March 25 to shareholders of record as of March 11. At the most recent closing share price, that yields 2.9%. This compares favorably with the average yield of stocks on the S&P 500 index, which currently stands at 2.3%.

Does it matter?
News of GNC Holdings' dividend raise comes shortly after the company released preliminary Q4 results that were encouraging. They indicate that same-store sales ticked up on a year-over-year basis, and that fiscal 2015 per-share earnings will come in at the upper range of the company's guidance ($2.87 to $2.92, up from 2014's $2.81).

It's a pair of positive developments for an enterprise that needed good news. 2015 was, to put it mildly, a forgettable year for GNC Holdings. It not only whiffed on earnings estimates several quarters in a row, but it was also targeted with a set of investigations and lawsuits over certain herbal supplements it sold.

Last year, it suspended sales of the offending supplements, while it beefed up margins for its products. So it seems to be taking the necessary steps to put the negatives behind it, and return to growth. We can assume that investors will find this encouraging and as a whole become somewhat more bullish on the stock.

But it's worth noting that GNC Holdings is far from a unique operator in its business. There's a smaller publicly traded chain, Vitamin Shoppe, plus a raft of independently owned stores crowding the market for vitamins and supplements. And the big pharmacy chains, such as Walgreens Boots Alliance and CVS Health, also peddle such wares.

So although the dividend is well sustainable and GNC Holdings seems poised for growth, investors should be aware that this is a challenging market that won't get any easier.

Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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