Tim Hortons raising dividend, will spend up to $440 million on share buybacks

OAKVILLE, Ont. – Tim Hortons Inc. (TSX:THI) is raising its quarterly dividend by about 23 per cent and spending up to $440 million over the next year to buy back its shares from the public market.

The announcements came as the restaurant chain announced it had $898.5 million of revenue during the fourth quarter, up 10.7 per cent from a year earlier.

However, the company’s profit missed analyst estimates.

Tim Hortons had 69 cents per share of net earnings attributable to Tim Hortons shareholders, up from 65 cents a year in the fourth quarter of 2012 but below analyst estimates of 77 cents per share.

Its operating income fell by 1.8 per cent to $147.8 million, in part because of a decision to remove Cold Stone Creamery locations in Canada.

The company says the decision to end ice cream sales in Canada will cost $19 million in the fourth quarter but will allow franchise owners to simplify their offering and focus on their core business.

The Cold Stone Creamery brand will continue to be offered in the United States.

Tim Hortons says its operating income was also affected by the decision to close some underperforming restaurants in various U.S. markets in the fourth quarter, resulting in a $6.6 million charge.

The company says its dividend will increase to 32 cents per share, payable March 18, up six cents per share.

It also renewed its share buyback program, which gives the company the ability but not the obligation to buy back shares from the public market for cancellation.

Under its 2013 normal course issuer bid, the company bought back the maximum allowable 15,239,531 shares at an average price of $59.88 each — about $912.5 million in total.