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How Is Seagate Improving Shareholder Value?

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Apr. 5 2018, Updated 8:00 a.m. ET

Share repurchases and dividend yield

In fiscal 2Q18, Seagate Technology (STX) repurchased shares worth $361 million and paid dividends worth $366 million. In fiscal 2Q17, it repurchased shares worth $248 million and dividends worth $188 million. That indicates a YoY (year-over-year) growth of 46% for share repurchases and 95% for dividends.

Seagate has a dividend yield of 4.4%, indicating a quarterly payout of $0.63 and an annualized payout of $2.52 per share. It has a dividend payout ratio of 51.7% and has increased its dividend in the last seven years. In 2017, Seagate paid $1.5 billion in dividends and $1.2 billion in share repurchases. Dividend yields for peer companies Western Digital (WDC), International Business Machines (IBM), NetApp (NTAP), and Hewlett Packard Enterprise (HPE) are 2.2%, 4%, 1.3%, and 1.7%, respectively.

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Focused on operational efficiency

Seagate has focused on operational efficiency to improve its bottom line and offset stagnant revenue. Its revenue has fallen from $15 billion in fiscal 2012 to $11.2 billion in fiscal 2016. Its revenue then fell to $10.8 billion in fiscal 2017 and is expected to rise marginally to $10.9 billion. Seagate’s CEO Dave Mosley stated, “Our supply chain from suppliers to factories to sales and fulfillment are now entirely focused on agility and flexibility for our customers.”

Seagate is optimistic about capturing future opportunities and achieving sustainable revenue growth. It’s staying positive about the macro environment, driven by enterprise cloud spending. It expects year-over-year growth in exabyte shipments for fiscal 3Q18 with a revenue decline of 5%–7% quarter-over-quarter.

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