How Does EMC Increase Its Shareholder Value?
Highlights of EMC Corporation's 1Q16 Results
EMC pays $227 million in dividends
As shown in the below chart, EMC Corp. (EMC) paid $227 million in dividends to shareholders in 1Q16. The free cash flow in 1Q16 was $588 million and the firm ended the quarter with $15 billion in total cash and investments. EMC plans to reduce $850 million in costs for 2016 through business transformation plans that were announced last year.
The CFO of EMC, Denis Cashman stated, “Most of the aggregate cost reductions will be coming over time in several targeted areas, including direct materials and manufacturing, process simplification, and integration and third-party spend. These programs reduce our costs and will also result in improved working capital.”
As a part of EMC’s lab transformation initiative, the company launched a centralized process to increase its utilization of lab equipment. This program prioritizes virtualizing workloads onto a common engineering cloud while also improving the utilization of lab equipment throughout the company.
Dividend yield and analyst recommendations
EMC pays ~$0.12 per quarter, or $0.46 for the year, as a dividend—a 1.7% yield. By comparison, its US-based (SPY) peers Microsoft (MSFT), Cisco (CSCO), and IBM (IBM) had dividend yields of 2.8%, 3.9%, and 4.1%, respectively.
Of the 30 analysts covering EMC, 17 have issued a “buy” recommendation and 13 have issued a “hold” recommendation. The analyst stock price target for the company is $29.50, with a median target estimate of $29.00. EMC is trading at a discount of 9.7% with respect to its median target.
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