Garmin Hikes Dividend - Analyst Blog

Worldwide provider of navigation, communications and information devices, Garmin Ltd. GRMN, recently raised the quarterly dividend by 6.7% to 48 cents per share. Prior to this announcement, Garmin had been paying a quarterly dividend of 45 cents.

The dividend will be paid in four equal quarterly installments of 48 cents per share in the second, third and fourth quarters of 2014 and the first quarter of 2015.

The strength of Garmin'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 dividend hike will inspire investors' loyalty toward the stock.

Strong balance sheet and cash flows provide Garmin the financial flexibility to engage in dividend hikes, share repurchases and strategic acquisitions. During the last-concluded quarter, the company spent $33 million on share repurchases and distributed $88 million as cash dividends.

Cash and cash equivalents were $1.30 billion at quarter-end. Garmin spent approximately $15.5 million on capex, yielding free cash flow of around $56.0 million. The company has no long-term debt.

The company's first-quarter earnings of 55 cents per share beat the Zacks Consensus Estimate by 11 cents, on the back of strong growth in new products that are increasingly diversifying its business. However, revenues of $583.2 million were down 23.2% sequentially but up 9.6% year over year.

Garmin is well positioned in the personal navigation devices market, although competitive pressures have affected its business. Garmin has launched several products throughout the year. We believe new products and the company's OEM approach will continue to expand its margins. The increase in dividend indicates that the company is confident about its steady cash flows.

Currently, Garmin has a Zacks Rank #3 (Hold). Other stocks that are performing well at current levels include Universal Electronics Inc. UEIC, Applied Micro Circuits AMCC and Exar Corp. EXAR. All these stocks sport a Zacks Ranks #1 (Strong Buy).