Corning to Reward Shareholders with 12.5% Dividend Hike
Corning Inc. GLW recently announced a hike of 1.5 cents in the quarterly dividend. The new dividend of 13.5 cents per share represents a 12.5% increase from the prior dividend of 12 cents.
The increased dividend will be paid on Mar 31, 2016, to shareholders of record as on Feb 25.
The strength of Corning’s business model is reflected in its strong cash generation capabilities and commitment to return value to shareholders. We believe continued dividend hikes will increase investors’ confidence in the stock.
Corning’s strong balance sheet and cash flows provide financial flexibility for dividend hikes, share repurchases and strategic acquisitions. In fourth-quarter 2015, the company spent $1.32 billion on share repurchases and $160 million on dividends. The cash and short-term investments balance was $4.60 billion, down $413 million. However, the company has a significant debt balance. Including long-term liabilities and short-term debt, the net debt position was $2.84 billion at the end of the quarter.
We remain encouraged by the strong cash position of the developer of advanced glass substrates for multiple markets and its ability to service long-term debts.
Corning’s fourth-quarter earnings beat our expectations but revenues missed the same by 3.8%. Overall, the business remained weak with the Optical segment and Environmental Technologies primarily contributing to the revenue growth. Profits declined across the board with slight improvement in Specialty Materials.
This dividend payment is in line with Corning’s new capital allocation plan, under which $10 billion will be returned to shareholders. In the fourth quarter, the company also announced that it will invest another $10 billion over the next four years to build the product portfolio. The bulk of this expenditure will come from operating cash flow, but reduce the company’s global cash balance to $2 billion.
Currently, Corning shares carry a Zacks Rank #3 (Hold). Some stocks worth considering in the same space are ARRIS International plc ARRS, Vocera Communications, Inc. VCRA and AudioCodes Ltd. AUDC. ARRIS International and Vocera Communications sport a Zacks Rank #1 (Strong Buy), while AudioCodes has a Zacks Rank #2 (Buy).
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