Computer peripherals company, Logitech International (LOGI), recently announced a 25% hike in its annual dividend to 27 cents per share. This translates into a dividend yield of 1.93%. The raised dividend indicates that the company is confident about a steady cash inflow.
The new dividend is likely to be paid on Dec 30, 2014, after it gains shareholders’ approval at the company’s annual general meet on Dec 18, 2014.
The strength of Logitech’s current business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. We believe that the continued increase in dividends will inspire investors’ loyalty through higher returns from the stock.
During the last reported quarter (third quarter of fiscal 2014), the company generated cash flow from operations to the tune of $33 million, which was almost double year over year and also marked the highest second-quarter cash flow in the last five years.
Meanwhile, the company’s cost-cutting and restructuring initiatives have immensely benefited the company. Logitech has also implemented measures like staff reduction and product portfolio revamping across all its business segments. Notably, its three-year turnaround plan was primarily designed to reduce costs while driving up profits and margins significantly, which is reflected in the company’s enhanced cash flow.
Logitech enjoys a strong position in the mobile speakers and PC gaming market, with some extent of resilience being shown even in the slow PC market. The company currently carries a Zacks Rank #3 (Hold). Some better-ranked companies in the sector include Alps Electric Co. Ltd. (APELY), Mercury Systems, Inc. (MRCY) and Planar Systems Inc. (PLNR). All three sport a Zacks Rank #1 (Strong Buy).
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