LONDON -- Shares of Reed Elsevier  have marched relentlessly higher since last summer, advancing a huge 65% from the start of June and hitting recent record peaks of 775 pence in the process.

And I am convinced the publishing and information giant should continue treading higher as its strategic transformation continues to deliver meaty sales growth. Meanwhile, the firm's steadfast commitment to returning cash to stockholders should see it become increasingly popular with income investors.

New strategy helps revenues edge higher in 2012
The company announced last month that underlying revenues rose 4% last year to 6.1 billion pounds, which in turn drove underlying adjusted operating profit 6% higher to 1.7 billion pounds.


Reed Elsevier saw 80% of its revenues generated through electronic and face-to-face channels by the end of last year, providing average underlying revenue growth of between 5% and 7%. The firm has made excellent progress in achieving this strategic aim, and further meaty upside is clearly on the table.

In addition, Reed Elsevier witnessed excellent strength in its risk and exhibitions divisions, where like-for-like sales rose 6% and 7%, respectively. The company reported fresh headway in emerging markets, too, an encouraging trend that is likely to bolster future growth rates.

Earnings and dividends expected to keep climbing
City analysts expect earnings per share to advance 6% to 53 pence this year before advancing 8% to 57 pence in 2014. The company was recently trading on a P/E ratio of 14.5 and 13.5 for 2013 and 2014, respectively, representing a slight premium to the forward earnings multiple of 13.3 for the wider media sector.

And I believe that Reed Elsevier provides excellent value given solid earnings growth prospects and its commitment to handing back capital to its shareholders.

The company hiked its dividend around 7% last year to 23 pence due to an improving market outlook, and I expect rising confidence to keep pushing the dividend higher in coming years.

Brokers put 2013 and 2014 dividends at 24.5 pence and 26.2 pence, correspondingly, which are projected to carry yields of 3.2% and 3.4%. Furthermore, these payments are well protected with coverage of 2.2 times for both of these years, comfortably above the safety benchmark of two times.

The company is also expected to keep returning cash to shareholders through share buybacks -- it executed 250 million pounds of buybacks last year following bubbly disposal activity, and is on track to raise this to 400 million pounds in 2013.

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The article Should You Buy Reed Elsevier Today? originally appeared on Fool.com.

Royston Wild does not own shares of Reed Elsevier, and neither does The Motley Fool. 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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