Cash, debt, and cash flows

Earlier in this series, we discussed growth in Oracle’s (ORCL) operating segments and their consequent impact on margins. Let’s look into Oracle’s cash, debt, and cash flows.

In fiscal 2017, Oracle’s cash reserves stood at ~$66.1 billion, and the company had ~$58.0 billion in debt. In fiscal 2016, it had only $44 billion in debt. In fiscal 4Q17, Oracle generated ~$14.2 billion and $12.1 billion in OCF (operating cash flow) and FCF (free cash flow), respectively.
A Look at Oracle’s Cash, Debt, and Cash Flows in Fiscal 2017

Oracle’s cash flow and dividends

Oracle’s FCF as a percentage of net income (or NI), from the last three years, has ranged from 123% to 143%. As a percentage of NI for the TTM (trailing 12 months), its FCF at the end of May 2017 was 137%. The FCF-to-NI ratio is significant because it indicates the earnings quality of companies. Ratios above 1 indicate higher earnings quality because free cash flows constitute a majority of net income. Usually, when both FCF and NI are in sync, it indicates sound earnings quality.

Although rising debt remains a concern, Oracle has managed to steadily increase its cash and cash flows. As a result, the company should be able to increase its shareholder returns going forward.

In the last 12 months, Oracle returned $6.1 billion, with $3.5 billion through share repurchases and $2.6 billion in dividend cash to its shareholders. The dividend will be payable on August 2, 2017, to shareholders of record on July 19, 2017.

Despite minimal revenue growth, Oracle doesn’t hold back much when it comes to dividends, as its investors and shareholders consider dividends as steady income—especially in the current scenario of increasing uncertainty and volatility. IBM (IBM) follows the same policy.

Latest articles

19 May

Chinese Stocks are Getting Crushed


In the last month the CSI 300 is down 11.5%, much more than US indices.

JCPenney (JCP) is slated to announce its results for the first quarter of fiscal 2019, which ended on May 4, on May 21.

17 May

What to Know about the US-China Trade War

WRITTEN BY Mayur Sontakke, CFA, FRM

The key point of contention in the US-China trade dispute is the large trade deficit the United States runs against China.

On May 16, the Labor Department reported jobless claims for last week. Initial jobless claims fell by 16,000 to 212,000 for the week ended May 11.

Jeffrey Gundlach recommended investors take advantage of the volatility in interest rates at the recent Sohn Conference.

Tesla (TSLA) has fallen 4.2% as of 11:55 AM EDT on May 17. While US equity markets opened in the red today, they've recouped their losses.