Motorola Solutions, Inc. (MSI - Free Report) recently announced a 9.6% year-over-year hike in its quarterly dividend payout. The proposed dividend of 57 cents per share or $2.28 on an annualized basis is payable Jan 15, 2019 to shareholders of record as on Dec 14, 2018.
Based on the closing price of $129.39 on Nov 15, the proposed dividend affirms a yield of 1.8%. A steady dividend payout is part of the long-term strategy of Motorola to provide attractive risk-adjusted returns to its stockholders. In addition, healthy dividend increases at periodic intervals have been one of its strengths.
Motorola had increased its quarterly dividend from 41 cents to 47 cents per share in December 2016 followed by another increase in December 2017 to 52 cents. The current hike reflects the inherent financial strength of the company and strong cash flow generated from continued focus on high-margin businesses and a healthy execution of operating plans.
The company has outperformed the industry in the past year with an average return of 42.3% compared with 3.3% rise for the latter.
Motorola is poised to gain from robust organic growth, disciplined capital deployment and a favorable global macroeconomic environment. The company expects to see strong demand across land mobile radio products, services and software while the Avigilon acquisition is likely to keep outperforming expectations. As the public safety market continues to embrace software offerings to enhance workflows, Motorola is able to sell cloud-first SaaS offerings in addition to on-premise solutions with ancillary implementation and managed services. The company is expanding its software offerings to provide solutions across the various segments of the public safety workflow.
In addition, Motorola’s Services and Software segment has been an area of significant focus. The company has expanded its services installed base and is building an end-to-end public safety command center platform. Management expects the segment to grow at a faster rate than Products and Systems Integration segment, and to drive meaningful operating margin expansion in 2019 and beyond. The company’s Services and Software primarily comprises recurring revenues, including Managed & Support Services, public safety and enterprise command center software, video software and unified communications applications.
Owing to solid quarterly revenue and earnings growth, management has raised guidance for 2018. Full-year non-GAAP earnings are currently anticipated to lie within the $7-$7.05 per share range on revenue growth of approximately 14.5%, up from the previous guidance of $6.79-$6.89. It assumes current foreign exchange rates, approximately 172 million shares and 22.5% effective tax rate. The guidance reflects an expectation of minimal impacts from tariffs, given the company’s limited exposure to China.
All these positive drivers and sound financial management probably helped the company to increase its quarterly dividend.
Motorola presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Harris Corporation (HRS - Free Report) and Juniper Networks, Inc. (JNPR - Free Report) , each carrying a Zacks Rank #2 (Buy) and QUALCOMM Incorporated (QCOM - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Harris topped earnings estimates in each of the trailing four quarters, the average surprise being 7.1%.
Juniper has a long-term earnings growth expectation of 5.3%. It beat earnings estimates in each of the trailing four quarters, the average surprise being 11%.
QUALCOMM has a long-term earnings growth expectation of 10.9%. It delivered an average positive earnings surprise of 19.8% in the trailing four quarters.
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