Because of this harsh reality, Seagate's shares trade as though its business is in a secular decline. Its shares command a mere 6.5 price to earnings ratio, and its dividend yield is an eye-popping 8.6%.
IMAGE SOURCE: SEAGATE TECHNOLOGY.
Still, Seagate is an intriguing company to follow from an investing perspective, in large part because the company does a great job of rewarding shareholders despite that business reality. Even with that high dividend yield, it only pays out about half its earnings as a dividend. In addition, it has been steadily buying back stock for several years, giving its owners an increasing share of the business. In July 2010, Seagate had 514 million diluted shares outstanding; by October 2015, it only had 308 million.
It's because of that buyback program and reasonable payout ratio that Seagate has been able to consistently increase its per share dividend for the past several years. Its most recent hike took place last October for its November dividend, when it raised the payment from $0.54 per share per quarter to $0.63 per share per quarter.
Over the long run, it's hard to tell whether Seagate's business will grow due to ever-increasing demands for storage, or whether it will shrink due to the tough business landscape it faces. Still, its shares have a lot of bad news already priced into them. Between that low valuation, its large and rising dividend, and its declining share count, it's certainly worth at least following Seagate.