How Western Digital Plans to Improve Shareholder Wealth



Optimize capital structure

In this series, we’ve seen that analysts expect Western Digital’s (WDC) revenue to increase 7.9% YoY (year-over-year) in fiscal 2018. Its revenue is also estimated to rise 3% in fiscal 2019. Western Digital has focused on expanding its profit margins, which has resulted in significant bottom-line growth.

Analysts expect WDC’s EPS to grow at a CAGR (compound annual growth rate) of 21.7% over the next five years. Its EPS is estimated to rise 20% YoY to $3.50 compared to revenue growth of 4.6%. In fiscal 2018, its EPS is expected to rise 59% to $14.64 compared to revenue growth of 8%.

We’ve also seen how WDC is looking to have an optimal capital structure. It intends to invest in the business organically and through acquisitions by identifying key growth areas.

Dividend yield and share repurchases

WDC has a dividend yield of 2.5% with an annualized payout of $2 per share. That amounts to a dividend payout ratio of 14.9%. Its dividend yield has increased at a CAGR of 12.6% over the last three years. Peer companies International Business Machines (IBM), NetApp (NTAP), Seagate Technology (STX), and Hewlett Packard Enterprise (HPE) have dividend yields of 4.4%, 2%, 4.3%, and 2.8%, respectively.

In fiscal Q3 2018, WDC paid $148 million in dividends and $155 million in share repurchases to shareholders.

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