(Reuters) - Nasdaq OMX Group Inc (NDAQ.O) declared its first quarterly dividend on Wednesday, but said first-quarter net earnings declined 18 percent mainly due to lower trading volumes for stocks and derivatives.
The exchange operator said it plans to implement cost reductions, including job cuts, as it adjusts to the low volume environment.
Nasdaq 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 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.
Revenue fell to $411 million from $413 million. Analysts expected $418.6 million.
The softer-than-expected results were mainly driven by an 11 percent decline in revenue from cash equities and derivatives as trading volumes declined on lower volatility and as retail investors stayed on the sidelines.
Shares of Nasdaq closed down 0.8 percent to $25.12.
Richard Repetto, an analyst at Sandler O'Neill, lowered his 2012 and 2013 earnings per share estimates for Nasdaq to $2.59 and $3.00 from $2.70 and $3.04 respectively due to lower-than-expected revenue capture rates for U.S. cash equities and Nordic derivatives.
"While we expect capture rates to improve slightly in coming quarters, the lower quarterly run rate weighs on our forward estimates. Combining this with continued weakness in industry volumes leads us to lower our estimates," he said in a note to clients.
In light of the difficult environment, Nasdaq said it plans to cut $25 million in costs this year, and to realize $50 million in annual savings in the years following.
"If volumes continue to be weak, we will continue to focus on the things that we can control, most importantly costs," Nasdaq Chief Executive Robert Greifeld said on a call with analysts.
He said the cost cuts would be achieved through technology, facility, and other infrastructure savings, as well as job cuts. The company expects $30 million in restructuring charges related to the cost reduction plan.
Nasdaq also said it signed a non-binding agreement with LCH Clearnet Group Limited regarding the proposed acquisition of the 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.
Nasdaq also announced an acquisition. The company, which runs U.S. and Nordic markets, said it acquired Norwegian-based NOS Clearing ASA, a clearing house primarily for tanker and dry cargo freight, seafood derivatives and electricity certificates, for a cash consideration of around NOK 231 million ($40.4 million).
Greifeld said Nasdaq would continue to look for small deals that would fit strategically with the company and which would result in an immediate return on capital.
Nasdaq's brand was recently given a boost when Facebook said it plans to list its common stock on the New York-based company's exchange. Nasdaq and the New York Stock Exchange have aggressively competed for listings over the past several years, and Facebook, which will be the biggest ever internet IPO, was courted for months by both exchanges.
Reporting by John McCrank in New York; Editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman