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Nasdaq's Profit Slips as Stock, Swap Volume Weakens

Nasdaq OMX Group Inc declared its first quarterly dividend on Wednesday, but said first-quarter net earnings declined due in part to lower U.S. trading volumes for stocks and derivatives.

The exchange operator said it would pay a quarterly dividend of 13 cents a share, a 2 percent yield, reflecting its strong cash flow and capital generation. It also said it would continue to repurchase shares.

"It is a material dividend, but it is relatively conservative," said Ed Ditmire, an analyst at Macquarie. "It's the lowest pay out ratio of any dividend-paying exchange, so that means they'll have plenty of room to raise it in years to come."

The Nasdaq Stock Market parent said it earned $85 million, or 48 cents a share, in the first quarter, down from $104 million, or 57 cents a share, a year earlier.

Stripping out an impairment charge and expenses for restructuring and strategic initiatives, Nasdaq said it had earned 61 cents a share, on par with a year earlier.

Analysts on average expected the New York-based company to earn 63 cents a share, excluding items, according to Thomson Reuters I/B/E/S.

While the earnings were below Wall Street expectations, there were a lot of positive announcements in the report, Ditmire said.

On top of the dividend, Nasdaq announced a cost-cutting program expected to bring $50 million in savings annually by the end of 2012, with $25 million in cost savings realized in 2012.

Nasdaq also said it signed a non-binding agreement with LCH.Clearnet Group Limited regarding LCH.Clearnet Group's proposed acquisition of International Derivatives Clearing Group.

"It sold a money-losing business, IDCG, which will both raise its earnings per share and free up capital which could be used for more productive things, whether that they are shareholder returns or acquisitions," Ditmire said.

Revenue at Nasdaq fell to $411 million from $413 million. Analysts expected $418.6 million. (Reporting by John McCrank in New York; Editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman)

Copyright 2010 by Reuters. All rights reserved.

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