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Lam Research's 4.5% Dividend Hike Boosts Shareholder Return

Zacks Equity Research

As a shareholder-friendly measure, Lam Research Corporation LRCX recently announced a hike in dividend payout. The move indicates the company’s sound financial position and intention to utilize free cash for enhancing its shareholders’ returns.

The company raised quarterly dividend by 4.5% to $1.15 per share from $1.10. This new dividend, approved by its board of directors, will be paid on Oct 16, 2019 to stockholders of record as of Oct 1.

Shares of Lam Research have returned 24.9% over a year against the industry’s 1.9% decline.

We believe that portfolio strength, robust liquidity, strong balance sheet and cash flow generation ability will support its shareholder-friendly initiatives. This will help the stock to sustain momentum in the remainder of fiscal 2019 and beyond.

Impressive Fundamentals Drive Growth

Lam Research topped the Zacks Consensus Estimate in all the trailing four quarters, with an average of 6.52%.

In the last reported quarter, the company reported non-GAAP earnings of $3.62 per share, which outpaced the Zacks Consensus Estimate by 22 cents. Further, revenues of 2.36 billion surpassed the Zacks Consensus Estimate by 0.47%.

Management remains positive about both etch and deposition technologies, which will likely continue to expand its presence in the serviceable addressable market.

Moreover, rising adoption of 3D architectures continues to drive the performance of non-memory segments. Further, advanced packaging technology inflections are acting as tailwinds.

Moreover, aggressive share buyback will fuel the bottom line. The company expects non-GAAP earnings for the fiscal first quarter to be $3.00 (+/- 20 cents) per share and revenues to be $2.15 billion (+/- $150 million).

 

Lam Research Corporation Price and Consensus

 

Lam Research Corporation Price and Consensus

Lam Research Corporation price-consensus-chart | Lam Research Corporation Quote

Cash Flow Generation Remains Strong

In the last reported quarter, cash and cash equivalents, short-term investments, as well as restricted cash and investment balance were $5.4 billion, down from $6.1 billion in the fiscal third quarter.

Moreover, Lam Research generated $880.5 million cash from operations in the last reported quarter. The company also paid $164.9 million in cash dividends.

Zacks Rank & Stocks to Consider

Currently, Lam Research has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alphabet Inc. GOOGL, Itron, Inc. ITRI and Teradyne, Inc. TER, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alphabet, Itron and Teradyne is currently projected at 17.5%, 25% and 11.4%, respectively.

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