Leading analog semiconductor manufacturer Avago Technologies Limited (AVGO – Analyst Report) recently announced a 9.4% year-over-year hike in its interim quarterly dividend payout to 35 cents per share or $1.40 on an annualized basis. The first-quarter fiscal 2015 dividend is payable in cash on Dec 31, 2014 to shareholders of record as of Dec 19.
Avago has continuously increased the quarterly dividend since its inception. Based on the closing price of $102.64 as on Dec 9, 2014, the proposed dividend offers a yield of 1.4%. A steady dividend payout is part of the long-term strategy of Avago to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company's most attractive features.
The current dividend hike is the fourth of its kind in 2014. Avago had earlier raised the quarterly dividend payout from 25 cents to 27 cents in March and from 27 cents to 29 cents in June, followed by an increase from 29 cents to 32 cents per share in September. In the last one-year period, share prices of the company have more than doubled for a stellar return of 120.3%. This signifies strong investor confidence in the stock, catapulting the shares to historic highs.
The dividend increase comes close on the heels of strong fourth-quarter fiscal 2014 results, wherein Avago reported substantial year-over-year improvements in revenue and recurring earnings on the back of accretive acquisitions. Non-GAAP net revenue (from continuing operations) for fourth-quarter fiscal 2014 more than doubled to $1,610 million from $738 million in the prior-year quarter. Non-GAAP earnings improved to $556 million or $1.99 per share from $227 million or 89 cents per share in the year-ago quarter.
Avago also has a solid liquidity position. The company generated $381 million in cash from operations in the reported quarter compared with $212 million in the prior-year period. At fiscal 2014 end, Avago had $1,604 million in cash and cash equivalents, which was significantly higher than the fiscal-end 2013 tally of $985 million.
Moving forward, Avago is further expected to continue to reap synergistic benefits from the acquisitions of LSI Corporation and PLX technology Inc.
Avago presently has a Zacks Rank #1 (Strong Buy). Other stocks that are worth considering in the industry include Anadigics, Inc. (ANAD – Analyst Report), FormFactor Inc. (FORM – Analyst Report) and Advanced Semiconductor Engineering Inc. (ASX – Snapshot Report), each carrying a Zacks Rank #2 (Buy).
