Symantec’s strong cash flows
In the third quarter of fiscal 2019, Symantec (SYMC) delivered total operating cash flows of $377 million, 28.2% higher than its operating cash flows of $294 million in the third quarter of fiscal 2018. The company’s cash flows from continuing operations increased 45% YoY (year-over-year). Its capex in the third quarter totaled $58 million compared to $33 million in the same quarter of the previous year.
Capital allocation policy
During the quarter, the company reviewed its capital allocation program and planned to take a balanced approach to buybacks, dividend payments, debt repayments, and acquisitions.
Symantec decided to increase its share repurchase authorization by $500 million to $1.3 billion in the third quarter. The company didn’t buy back shares in the quarter, instead planning to start in the fourth quarter. However, it didn’t disclose the number of share repurchases it intended to make. Symantec’s peer Oracle (ORCL) repurchased shares worth $10 billion in the second quarter of fiscal 2019.
Symantec also has a sizable debt load and is therefore making plans to reduce its debt. Symantec intends to reduce its debt in the fourth quarter and will prepay the $600 million term loan that’s due in August 2019. With this prepayment, Symantec will have repaid debt worth $3.8 billion in fiscal 2018 and fiscal 2019. The company will be left with total debt of $4.5 billion after the prepayment.
The company also plans to look for merger opportunities and pay a regular quarterly dividend of $0.75 per share. The dividend will be paid on March 13 to shareholders of record as of February 19. The company’s annualized dividend of $3.00 per share represents a dividend payout ratio of 33.3% and a yield of 1.31% as of February 1. In comparison, Symantec’s peers Microsoft (MSFT), Oracle, and IBM (IBM) have dividend yields of 1.79%, 1.50%, and 4.68%, respectively, as of February 1.