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Is Seagate Technology PLC’s Dividend Sustainable?

Source: YCharts.

Over the last 12 months, the hard-disk-drive giant actually pulled in a whopping $6.43 in free cash flow per share.

The company's dividend per share, which the company recently raised by 17%, now sits at $0.63 per share on a quarterly basis ($2.52 per share annualized). This dividend is well below what the company has generated in free cash flow per share over the last 12 months, which leads me to believe that the current dividend payout is quite sustainable.

Seagate is also aggressively buying back stock, paving the way for further increases

Another way that companies return cash to stockholders is via share repurchases. These repurchases return value to stockholders by reducing the number of shares outstanding. By doing so, for a given level free cash flow, free cash flow per share goes up.

This, unsurprisingly, helps to amplify a company's ability to deliver a bigger, sustainable dividend.

As you can see in the following chart, Seagate has been aggressively buying back stock and doing so at a pace that has led to a substantial reduction in its diluted share count:

Source: YCharts.

According to Seagate's most recent quarterly filing, the company still has a whopping $1.9 billion remaining under its current repurchase program. At the company's current market capitalization of $10.76 billion, that's good for nearly 18% of the current shares outstanding.

Seagate is a sustainable dividend machine

It's pretty clear that Seagate generates a lot of cash and does a solid job of returning it to shareholders through both share repurchases and dividends. As a Seagate shareholder, I am confident that the current dividend is sustainable and even believe that it can continue to grow nicely in the years ahead barring some unforeseen hit to the company's business.

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The article Is Seagate Technology PLC's Dividend Sustainable? originally appeared on Fool.com.

Ashraf Eassa owns shares of Seagate Technology. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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