WOONSOCKET, R.I. — CVS Caremark Corp. is raising its quarterly dividend by 15%, citing its robust financials and positive growth outlook.

The drug store and pharmacy benefit management company said Tuesday that its board of directors has approved a dividend of 8.75 cents per share of common stock, payable on February 2 to shareholders of record on January 22.

According to CVS Caremark, the increase hikes the annual rate to 35 cents per share, up 4.5 cents per share from the previous rate of 30.5 cents.

"An annual review of our dividend is an essential component of our company’s capital allocation strategy, and I’m pleased to note that this marks our seventh consecutive year of dividend increases," David Denton, executive vice president and chief financial officer at CVS Caremark, said in a statement.

"This considerable increase reflects our continued strong financial performance, our optimism with respect to future growth and our significant cash-generation capabilities," Denton explained. "It also reflects our ongoing commitment to enhancing total returns for our shareholders."

CVS Caremark shares were down 48 cents to $33.45 as of midday trading on Tuesday.

The company’s stock has rebounded over the past couple of months since plunging about 20% on November 5. During a third-quarter earnings call with analysts that day, chairman and chief executive officer Tom Ryan forecast disappointing results for the PBM business in 2010, based on the loss of a net of $4.8 billion in contracts, and said that Caremark chief Howard McLure was retiring.

Shares closed at $28.87 on November 5, down from $36.15 the day before, even though the company reported hefty sales and earnings gains in the third quarter, along with solid same-store results, and beat Wall Street’s profit estimate.

Some analysts, despite shaving their earnings estimates for CVS Caremark, said the market’s response to the PBM news was extreme and overlooked the company’s strong business performance.

"We continue to expect the retail segment to be a source of stability for CVS. We expect further benefits from Maintenance Choice [the company’s mail-to-retail prescription program] and continued outperformance versus peers," Sanford Berstein analyst Helene Wolk wrote in a research note on CVS Caremark’s third-quarter results. "While CVS disappointed investors with 2010 guidance around the PBM segment, we believe that the market overreacted and see current valuations as a buying opportunity [for investors]."

And investors have seen encouraging news from CVS Caremark’s PBM unit in recent weeks. The company named Per Lofberg to head the PBM business, filling the vacancy left by McLure, and it landed a nearly $1 billion contract renewal the Teacher Retirement System of Texas.

Over the past 52 weeks, CVS Caremark’s stock price has ranged from a low of $23.74 to a high of $38.27.