Now seems to be a pretty good time to perform a stock analysis as we approach the middle of the month! We have had ups and downs within the Market and it really can’t decide which way it truly wants to go. With interest rates remaining on hold (thanks Fed… – was really hoping for a bigger discount, kidding!), the market has been a tick upwards over the last 1-2 weeks. I wanted to hop into a sector and stock that has been beaten down this year with what is perceived to be sound dividend metrics. How about the technology sector? Seagate Technologies (STX) – you are up!
The Stock – seagate Technologies (STX)
Seagate Technologies (STX) – Per google finance: “Seagate Technology plc (Seagate) is a provider of electronic data storage products. The Company’s products are hard disk drives (HDD). The Company produces a range of electronic data storage products, including solid state hybrid drives (SSHD), solid state drives (SSD), peripheral component interconnect express (PCIe) cards and Serial AT Attachment (SATA) controllers. The Company’s products are designed for enterprise servers and storage systems for applications, client compute applications and client non-compute applications. The Company’s product and solution portfolio for the enterprise data storage industry includes storage enclosures, integrated application platforms and high performance computing (HPC) data storage solutions. Its data storage services provide online backup, data protection and recovery solutions for small to medium-sized businesses. Its products include Enterprise Performance HDDs, Mobile HDDs and SSHDs, NAS HDDs, and Surveillance HDDs, among others.” They are headquartered in Dublin, Ireland and are massive in the data storage arena. The main competitors would be Sandisk and Western Digiltal Corp. At $15B in market capital – they are in between the two competitors and offer some very valid metrics when looking at it from a dividend stock standpoint. No, they aren’t a foundation stock, they definitely are far from an Emerson (EMR) (whom I have bought 3x) and do not even take a sniff at Bert’s 5 always buy stocks. Definitely a different approach here.
STX – Dividend Diplomat Screener Analysis
Well, as of this writing on 10/11/2015 – the stock is trading at $49.03. Using the dividend diplomat stock screener, lets check the stats and against 2 competitors from Morningstar and Google:
- Price to Earnings – Forward earnings are looking to be $4.46 now based on the analysts for 2016 in June (when WDC also has it’s year end, with SNDK’s in December). With the current price, this means the P/E is roughly 10.99 – under the S&P ratio and also is less than the 2 competitors listed above. Undervalued, eh? I like it, I like it.
- Dividend Yield – Current yield is at 4.41%; which my portfolio overall is currently at roughly 4% – 4.05%. Just above my portfolio, which would help boost it overall if I make a purchase. Also, it is yielding much higher than the other 2 competitors, currently. Also – not much yield history for any of the 3 companies, as they are fairly young in their dividend history, but they are yielding much higher than their historical yield – one of the reasons why this downturn offers more yield for less of a price as I explained earlier last month.
- Payout Ratio – at 48.43% from my calculation – Not too bad – right in the middle, obviously higher than the other 3, but not much dividend history to go off of. Analysts appear to be expecting lower earnings per share guidance for the current year ends they are in and then expecting higher earnings afterwards. Again, still room for growth here.
- Dividend Growth Rate – As well all know, the power of the growth rate is real. Their isn’t that much DGR here, as WDC and STX have approximately a 3 year history and well, any of them show huge dividend increases, since most technology companies don’t have dividends or are recently introducing them – Microsoft (MSFT) during the mid 2000’s and then Apple Inc (AAPL) recently in the last few years. They all get the nod here.
- Share Buy Back – See why this is big news for dividend investors ; STX has decreased their shares by 4.835% or 15M shares, huge and that will allow earnings per share growth and room to grow their dividend.
Conclusion on STX Stock Analysis
This is interesting. Who would have thought Seagate Technologies (STX) to be that big of a company, to produce great dividend results and have the right characteristics that us dividend investors love? The only thing that is missing is the “history” of dividend increases that we all come to see/want in a stock – but I think time will bode well. There is a market for storage, especially as we all keep transferring devices so frequently, and wanting to save everything we have without going full “cloud” based. No they weren’t on our September Watch List but I may have to keep an eye on them. Bert may have to deploy more capital, given that he has cruised passed his $15K goal and may be interested in boosting that dividend income up.
What does everyone else think of STX right now? Would you purchase at these levels? Like where the market is going? Any takers here? Love the feedback and excited to hear back! Thank you again for stopping by to check this out.