Symantec’s Decent Cash Flow Supports Dividend Policy in 4Q15
Symantec Continues to Disappoint Investors in Fiscal 2015
Dividend announcement in fiscal 4Q15
Following its policy of returning value to its shareholders through dividends, Symantec (SYMC) declared a cash dividend of $0.15 per share in fiscal 4Q15. That quarter, the company returned $227 million to share repurchases and dividends.
Cash, debt, and cash flow position
In 4Q15, Symantec reported that it has $3.89 billion in cash, cash equivalents, and short-term investments. As of April 3, 2015, Symantec carried $2.1 billion total debt on its books. The majority of its debt is long-term.
In fiscal 2015, Symantec’s non-GAAP (generally accepted accounting principles) net income and EPS (earnings per share) were $1.31 billion and $1.88, respectively. Its operating cash flow (or CFO) and free cash flows (or FCF) stood at $1.31 billion and $931 million, respectively. Since Symantec is a subscription offerings business, it enjoys a negative cash conversion cycle. That means it can manage its working capital judiciously.
Symantec’s decent cash reserves and relatively low debt indicate the strength of its balance sheet. The company’s negative working capital cycle and strong cash flow generation allow it to return cash to shareholders without resorting to external funding.
Research and development strategy
As we’ve already covered in a Symantec 2Q15 earnings review, part of the company’s Symantec 4.0 strategy is its plan to increase the research and development (or R&D) expenditure from 14% of its revenue in 2013 to 16% by 2017 due to new product launches. In fiscal 4Q15 and fiscal 2015, Symantec spent 19% and ~17.5% of its revenues, respectively, on R&D.
Symantec’s peers Oracle (ORCL) and Microsoft (MSFT) spend approximately 12%-13% of their total revenues on R&D. IBM (IBM), on the other hand, allocates only 5%-7% of its revenues to R&D.
If you’re bullish about Symantec, you can invest in the PowerShares QQQ Trust ETF (QQQ) to gain exposure to Symantec. QQQ invests about 0.32% of its holdings in Symantec.
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