Buying quality stocks on pullbacks is never a bad idea, and Motorola Solutions (MSI) is a quality stock offering such an opportunity, suggests Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
Indeed, shares are trading at a roughly 10% discount to their 52-week high of around $182 per share. The firm had a solid third quarter, with per-share profits beating estimates and the backlog and cash flow growing nicely.
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Motorola Solutions provides communications solutions. It offers communications infrastructure devices and solutions including portable radios, video cameras, and radio network processing software. Customers include government, public safety and first-responder agencies, and industrial customers.
The company has good momentum going into the end of the year. For the third quarter, revenue rose 7%, with organic revenue up 4%. The company’s per-share profits of $2.04 beat the consensus analysts’ estimate by $0.09. Operating margins rose 120 basis points during the quarter.
The backlog at the end of the quarter was $11 billion, the company’s highest backlog ever and up 17% year over year. Finally, operating cash flow in the quarter was up 55% to $525 million.
The strong third-quarter performance is a factor behind the company boosting its 2019 earnings guidance to $7.77 and $7.82, up from prior guidance of $7.67 to $7.77. The recent 12% dividend hike is consistent with the upward glide path of the company’s dividend.
Indeed, the payout has nearly doubled since 2014, and future dividend increases should be in the 8%-10% range. The stock offers an attractive opportunity for long-term investors.
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