Symantec’s dividend policy
In 2013, Symantec Corporation (SYMC) started its dividend payments. Leading technology players such as SanDisk (SNDK), EMC Corporation (EMC), and IBM (IBM) also initiated dividend policies for the first time in 2013. In 2014, it returned 90% of its free cash flow to its shareholders. Symantec has announced it will return around 50% of its free cash flow to shareholders through dividends and share buybacks. In 2Q15, Symantec declared a quarterly cash dividend of $0.15 per common share. In 2Q15, the company returned $229 million through share repurchases and dividends. Cash dividends to shareholders and share repurchases of 5.26 million shares involved $104 million and $125 million, respectively.
PowerShares QQQ Trust ETF (QQQ) is likely to benefit from Symantec’s good results, as it has significant exposure to it.
Cash, debt, and cash flow position
As of October 3, 2014, Symantec reported that it has $3.79 billion worth of cash, cash equivalents, and short-term investments. It carried $2.1 billion total debt on its books. Symantec enjoys a negative cash conversion cycle due to its subscription-based business. Approximately 39% of the company’s cash is held onshore to invest in technology acquisitions. The company’s negative working capital cycle and strong cash flow generation allow it to return cash to shareholders without resorting to external funding.
Strong cash flow generation enhances scope of dividend distribution
As the above chart shows, Symantec has always generated very good cash flows except in 2Q15. Low operating cash flow and an increase in R&D (research and development), which is a capital expenditure, are the likely reasons for this decline. Owing to strong cash flow generation, it’s considered a cash cow. This strong cash flow generation has enabled the company to pay dividends to its shareholders.