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How Juniper Networks Aims to Improve Shareholder Value

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Mar. 26 2018, Updated 10:30 a.m. ET

Share buybacks and dividend yield

In 4Q17, Juniper Networks (JNPR) returned $330.0 million in share repurchases and paid $37.0 million in cash dividends. Juniper Networks increased its dividend by 80.0% to $0.18 per share in 4Q17.

The firm’s dividend yield now stands at 2.8% with an annualized payout of $0.72 and a dividend payout ratio of 53.7%. Comparatively, the dividend yields for peers Cisco Systems (CSCO) and Hewlett Packard Enterprise (HPE) stood at 3.0% and 1.6%, respectively.

Juniper Networks also announced a new $2.0 billion buyback authorization with the intention of initiating $750.0 million in accelerated share repurchases. In 2017, Juniper Networks returned $720.0 million in share buybacks and $150.0 million in cash dividends.

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Gross margin to be under short-term pressure

Juniper Networks expects its gross margins in 1Q18 to remain under pressure, driven by lower volume and product mix due to architectural shifts of its customers.

Juniper Networks’ CFO, Kenneth Miller, stated, “There are many factors that impact gross margins. And while it is a dynamic environment, we expect full year margins to improve directionally from Q1 levels.”

In order to offset gross margin pressures, Juniper Networks is making efforts to optimize supply chain, manage prices, increase software and solution sales, and focus on value engineering. Juniper Networks aims to increase its operational efficiencies and manage operating expenses, which could increase the bottom line.

Following the passage of the Tax Cuts and Jobs Act, Juniper Networks plans to repatriate ~$3.0 billion, which it plans to reinvest in the business, support mergers and acquisitions, and fund its capital return program.

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