Seagate (STX) has a dividend yield of 4.5%, amounting to an annualized payout of $2.52 per share. Seagate has a dividend payout ratio of 47.2%, and the firm has increased dividend payments for the last seven years. Seagate has increased its dividend at a CAGR (compound annual growth rate) of 11.3% in the last three years and 33.3% in fiscal 2017.
Seagate has tried to improve shareholder value by increasing dividend payments to offset a decline in revenue. In Q3 2018, Seagate paid a dividend of $179 million. Peers Western Digital (WDC), NetApp (NTAP), Hewlett Packard Enterprise (HPE), and IBM (IBM) have dividend yields of 2.6%, 2.1%, 3%, and 4.6%, respectively.
Cash flow from operations
Seagate managed to reduce operating expenses by 13% YoY (year-over-year) to $385 million in Q3 2018. Capital expenditure was $69 million, as the firm focused on ramping up its high capacity HDD products. The firm expects capex to account for 5% of revenue in fiscal 2018.
Cash flow from operations was $558 million with free cash flow of $489 million in Q3 2018. Seagate’s CFO David Morton stated, “Over the last two years, we have made many changes to optimize our operational footprint and supply chain management. Product complexity is a significant challenge in the storage marketplace right now and we believe our agility and manufacturing responsiveness within the component supply chain provides a significant competitive advantage for Seagate.”
Price target of $55 for Seagate
Seagate stock has appreciated 36% this year after rising 17% in 2017. Of the 28 analysts tracking Seagate, six have recommended “buys,” and 19 have recommended “holds.” There are three “sell” recommendations on the stock. Analysts’ 12-month average price target for Seagate is $56.82, and their median estimate is $55. Seagate is trading at a premium of 1.2% to analysts’ median estimate.