Leading connectivity service provider TE Connectivity Ltd. (TEL) on Tuesday revealed its plan to utilize its free cash to boost stakeholders’ return by announcing a dividend hike. However, the news did not provide much impetus to the stock, as the share price of the company increased a tad 0.4% till Thursday.
The dividend hike news followed impressive fourth-quarter 2013 results that were declared on Sep 28, whereby earnings of 93 cents a share increased 22% year over year. TE Connectivity returned over $1.2 billion to stakeholders via dividends and share buyback in fiscal 2013. The company’s cash flow has been consistently improving and its free cash flow to sales ratio has been above 10% for six years in a row.
TE Connectivity raised its quarterly dividend by 16% from 25 cents a share (or $1.00 annually) to 29 cents (or $1.16 annually). The increased dividend will be paid beginning third quarter of fiscal 2014. The current dividend yield based on the proposed payout and the last closing market price ($53.05 as on Dec 5, 2013) is 2.2%. This is the fourth quarterly dividend increase for TE Connectivity since it reinstated dividend payment in 2007 at the rate of 14 cents per share.
The dividend hike proposal, approved by the company’s board of directors, will now be presented at its Annual General Meeting of Shareholders for approval. The meeting is scheduled to take place in Mar 2014.
TE Connectivity last hiked its quarterly dividend from 21 cents to 25 cents in May 2013, reflecting an increase of approximately 19%. The company’s commitment toward increasing shareholders’ return reflects its free cash flow generating capability, sound liquidity position and defined future prospects. Moving forward, TE Connectivity remains confident of its growth potential, suggesting enhanced value for shareholders.
TE Connectivity currently has a Zacks Rank #3 (Hold). Other stocks in the industry which look promising at the moment include Fabrinet (FN), Kyocera Corp. (KYO) and CTS Corporation (CTS). Fabrinet and Kyocera currently have a Zacks Rank #1 (Strong Buy), while CTS Corporation carries a Zacks Rank #2 (Buy).