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Seagate Boasts Big Dividend Yield

By: Investor's Business Daily
Posted: 8/17/2012 6:29:00 PM
Referenced Stocks: CSCO;STX;XRTX

Utility, food, beverage and tobacco are not the only sectors to find dividend stocks. As noted in Friday's column, networking giantCisco Systems ( CSCO ) pays a healthy dividend.Seagate Technology ( STX ) is another leading technology stock that pays dividends.

The hard-drive maker pays 32 cents a share each quarter, or $1.28 on an annualized basis. This works out to a yield of about 3.6%.

Seagate has the biggest yield in IBD's Computer-Data Storage industry group. The only other dividend-paying stock in the group is Xyratex ( XRTX ), with a 2.4% yield. Seagate is one of the highest-yielding tech issues in the S&P 500, which it joined in late June.

Seagate didn't always reward shareholders with a dividend. It halted payouts for more than two years starting in early 2009. But Seagate announced the return of its dividend program in April 2011. The company cited its strong balance sheet, ability to generate cash and its commitment to maximize shareholder value.

Seagate has since raised its dividend twice, both times this year.

In late January, the company lifted its payout by 39% to 25 cents a share per quarter. It also added $1 billion to its share buyback program.

The second lift came in late July. That's when Seagate boosted its dividend by 28% to the current rate of 32 cents. Its dividend has surged 78% since its reinstatement.

Seagate has posted spotty earnings and sales results in the past few years. It has a three-year Earnings Stability Factor of 65. The rating goes from 0 to 99, with lower numbers being better. But the computer hard disk maker recently put up some big numbers for its Q4 and fiscal 2012, which ended June 29.

Profit for the June-ended quarter bolted 761% to 24 cents a share, though it missed expectations. Revenue jumped 57% to $4.48 billion, but also lagged expectations.

That followed EPS gains of 300% and 956% that ended a five-quarter period of declining earnings.

For all of fiscal 2012, Seagate's earnings skyrocketed 444% to $6.75 a share. Sales grew 36% to $14.9 billion. In its prior fiscal year, profit tumbled 63%, while revenue fell 4%.