Improvement in operating margin and cash flow
In the chart below, we can see that Motorola Solutions (MSI) has improved its operating margin at a CAGR[1. compound annual growth rate] of 8.4% between 2013 and 2016. Its operating margin has improved from 18.6% to 23.6% during this period. Its free cash flow also rose 32.2% from $387.0 million in 2013 to $894.0 million in 2017.
Motorola Solutions’ operating expenses declined from $2.0 billion in 2013 to $1.5 billion in 2016. Its EPS (earnings per share) increased at a CAGR of 23.5% from $2.61 in 2013 to $4.20 in 2016.
MSI has returned $13.3 billion to shareholders between 2011 and 2016 in the form of share repurchases and dividends. MSI has allocated 50.0% of its free cash flow to share repurchases and acquisitions, 30.0% to dividends, and 20.0% to capital expenditure.
In 2016, MSI returned $1.1 billion to its shareholders—$300.0 million in the form of dividends and $800.0 million in the form of share repurchases. MSI’s capital returns in 2015, 2014, and 2013 were $3.4 billion, $3.0 billion, and $2.0 billion, respectively.
At the end of 3Q17, MSI’s dividend yield was 2.1%, indicating an annualized payout of $2.08 per share. MSI has a dividend payout ratio of 40.5% with dividend growth for the last seven consecutive years.
In the last three years, MSI’s dividend has grown at a CAGR of 14.0%. Among its peer communication equipment technology (QQQ) firms, Harris Corporation (HRS) and L3 Technologies (LLL) have dividend yields of 1.6% and 1.4%, respectively.