Lam Research Corporation (LRCX - Free Report) recently announced a hike in dividend payout as a shareholder-friendly measure. The move indicates the company’s sound financial position and intention to utilize free cash for enhancing shareholders’ returns.
The company raised quarterly dividend by 13% to $1.30 per share from $1.15. This new dividend, approved by its board of directors, will be paid on Oct 14, 2020 to stockholders of record as of Sep 30.
Shares of Lam Research have returned 60% over a year against the industry’s 59.4% rally.
We believe that its portfolio strength, robust liquidity, strong balance sheet and cash flow generation ability will support shareholder-friendly initiatives. This will help the stock to sustain momentum in the remainder of fiscal 2020 and beyond.
Impressive Fundamentals Drive Growth
Lam Research topped the Zacks Consensus Estimate in three of the trailing four quarters, while missed once, with an average of 6.02%.
In the last reported quarter, the company reported non-GAAP earnings of $4.78 per share, which outpaced the Zacks Consensus Estimate by 58 cents. Further, revenues of 2.79 billion surpassed the Zacks Consensus Estimate by 2.4%.
During the reported quarter, the company saw an increase in NAND demand related to 5G migration, video and new game consoles. It witnessed persistent Foundry strength in the quarter. Also, there was an accelerated demand for remote equipment support.
Management remains positive about both etch and deposition technologies, which will likely expand its presence in the serviceable addressable market. Further, advanced packaging technology inflections are acting as tailwinds.
Moreover, aggressive share buyback will fuel the bottom line. The company expects non-GAAP earnings for fiscal first-quarter 2021 to be $5.15 (+/- 40 cents) per share and revenues to be $3.1 billion (+/- $200 million).
Cash Flow Generation Remains Strong
In the fiscal fourth quarter, cash and cash equivalents, short-term investments, as well as restricted cash and investment balance were $6.7 billion, up from $5.4 billion in the prior quarter.
Moreover, Lam Research generated $813 million cash from operations in the last reported quarter. The company also paid $167.7 million in cash dividends.
Zacks Rank & Stocks to Consider
Currently, Lam Research has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Dropbox (DBX - Free Report) , Etsy, Inc. (ETSY - Free Report) and Maxim Integrated Products, Inc. (MXIM - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate of Dropbox, Etsy and Maxim is pegged at 34.4%, 26.5% and 10%, respectively.
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