After reporting an encouraging first quarter last month, Applied Materials Inc. (AMAT - Analyst Report), the leading producer of chip making equipment, has announced its decision to hike quarterly dividend by one cent to 10 cents per share. This translates into an 11% increase from the prior dividend.
The increased dividend will be paid on Jun 13, 2013, to stockholders of record as of May 23, 2013. Prior to this announcement, Applied had been paying a quarterly dividend of 9 cents per share.
The strength of Applied’s business model is reflected in the company’s strong cash generation capabilities and its commitment to return value to shareholders. We believe that continued increasein dividends will inspire investor loyalty through higher returns from the stock.
Applied’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, share repurchases and strategic acquisitions. During the last-concluded quarter, Applied spent $48 million on share repurchases and $108 million on dividends.
The cash and short-term investments balance was $1.75 billion at quarter-end. The debt cap ratio including long-term liabilities and short-term debt was just 26.8%. We remain encouraged by Applied’s strong cash position and its ability to service its long-term debts.
Applied reported decent first quarter results, with both revenues and earnings per share surpassing our expectations. The company provided a strong revenue outlook for the second quarter, which was up 15–25% sequentially. Applied’s strong position in the semiconductor market, improving business, its huge portfolio and strategic relationships are all positives.
The regular dividend hikes are a good way of encouraging investor confidence as it returns shareholder value. The increase in dividend indicates that the company is heading toward strong future growth. Though consumer demand is expected to be weak, other areas, including commercial aerospace, mobile and automotive markets are all likely to see increased demand in the near future.
Recently, mobile chip giant, Qualcomm Inc. (QCOM - Analyst Report), which carries a Zacks Rank #2 (Buy) also raised its dividend by 40%.
Applied shares currently have a Zacks Rank #2 (Buy) similar to another equipment supplier KLATencor (KLAC - Analyst Report). Another stockworth considering is Advanced Energy Industries, Inc. (AEIS - Snapshot Report) with a Zacks Rank #1 (Strong Buy).