California-based semiconductor maker Xilinx Inc. XLNX recently announced a hike in quarterly cash dividend, effective first-quarter fiscal 2016. This is the 10th consecutive dividend hike since the program was started in 2004.
The company hiked its quarterly dividend by approximately 7% to 31 cents per share from the prior payout of 29 cents. This translates to a yearly dividend of $1.24 per share, reflecting a dividend yield of nearly 3.1% based on yesterday’s closing price of $39.67. The new dividend will be paid on Jun 3 to shareholders of record as on May 13.
Xilinx has a consistent track record of returning value to shareholders through share repurchase and dividend payouts. The company has returned approximately 100% of its operating cash flow over the last 10 years. Moreover, Xilinx has repurchased approximately $1.8 billion common stock since 2010.
Furthermore, Xilinx has regularly paid quarterly cash dividends for the past 11 years. The company started paying 5 cents per share as quarterly dividend in fiscal 2004 which has been raised every year to reach the present amount of 31 cents. This represents a compounded annual growth rate of 18%.
During the first three quarters of fiscal 2015, Xilinx returned approximately $476 million and $230.6 million through share buyback and quarterly dividends, respectively.
Xilinx’s strong balance sheet and cash flow provide it with the financial flexibility to undertake shareholder-friendly initiatives as well as scope for product innovation and expand in newer markets. The company generated operating cash flow of $624.7 million in the first nine months of fiscal 2015 and ended the period with cash, cash equivalents and short-term investments of nearly $2.92 billion.
Some other companies which have a consistent track record of returning value through share repurchases and dividend payments include Yahoo! Inc. YHOO, SanDisk Corporation SNDK and Accenture plc ACN.
We believe that such initiatives not only enhance shareholder return but also raise the market value of the stock. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Xilinx remains confident of its growth potential, thereby raising hope for further increase in shareholder value.
However, disappointing revenue guidance for fourth-quarter fiscal 2015 keeps us skeptical about the company’s near-term growth prospects. The company is anticipating a sequential decline in fourth-quarter revenues due to soft performance at aerospace and defense division resulting from seasonality and timing related issues. Moreover, wireless sales are anticipated to be negatively impacted from the delay in timing of the FDD-LTE deployments.
Xilinx currently carries a Zacks Rank #4 (Sell).
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