), the leading manufacturer of process control equipment, has
announced its decision to hike quarterly dividend by 5 cents to
45 cents per share. This translates into a 12.5% increase from
the prior dividend. The increased dividend is expected to take
effect beginning with KLA-Tencor's quarterly dividend to be
declared in August 2013. Prior to this announcement, KLA had been
paying a quarterly dividend of 40 cents per share.
The strength of KLA'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
increase in dividends will inspire investor loyalty through
higher returns from the stock.
KLA'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,
KLA spent $68.3 million on share repurchases and $66.6 million on
dividends. The cash and short-term investments balance was $2.88
billion, up $301.3 million at quarter-end. The debt to total
capital ratio including long-term liabilities and short-term debt
was just 17.8%. We remain encouraged by KLA's strong cash
position and its ability to service its long-term debts.
KLA reported decent third quarter results, with both revenues
and earnings per share surpassing our expectations. However, the
company's fourth quarter non-GAAP EPS guidance of $0.66-$0.86 was
below the Zacks Consensus Estimate of $0.86.
Regular dividend hikes are a good way of encouraging investor
confidence as it returns shareholder value. Though the company's
most important foundry segment remains under pressure, the
underlying drivers (process node transition and strong demand for
smartphones and mobile computing devices) should drive increased
capex spending in the second half of the year.
Currently, KLAshares carry a Zacks Rank #3 (Hold). Other
stocks that are performing well at current levels include
Applied Materials Inc
), all carrying a Zacks Rank #2 (Buy).
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