Western Digital Corporation’s (WDC) board of directors recently increased the quarterly dividend rate and approved a new share repurchase program. These initiatives reflect the company’s sound financial position and favorable prospects.
The California-based company declared a cash dividend of 50 cents per share for the third quarter of fiscal 2015 payable on Apr 16 to shareholders of record as on Apr 3. This represents a 25% hike from the previous quarter’s dividend payment of 40 cents. This is the third time that Western Digital has raised the dividend rate since it started paying in Sep 2012.
Additionally, the company’s board of directors authorizes a new share repurchase program of $2.0 billion, representing nearly 8.5% of its total outstanding shares at the closing price of $100.68 on Feb 3.
Furthermore, as of Feb 2, the company had approximately $384 million remaining under its previous authorization, bringing the total to $2.384 billion.
Per the new program, Western Digital will have the discretionary power to modify, cancel or terminate its buyback and dividend policies at any time it wishes. Furthermore, the company can repurchase its common stock in the open market or privately negotiated transactions considering the prevailing market and business conditions.
Apart from the above, a Rule 10b5-1 can be entered into by the company under its own jurisdiction for facilitating its share repurchases. Enacted by the U.S. Securities and Exchange Commission in 2000, Rule 10b5-1 allows major holders of a publicly traded company to sell a predetermined number of stakes at a preset time. The corporate generally use this plan to avoid allegations of insider trading.
Western Digital has a consistent track record of returning cash to its shareholders through dividend payments and share repurchases. Since 2012, the company has returned approximately $2.6 billion through share buyback programs. During the first two quarters of fiscal 2015, the company returned nearly $720 million through share buybacks and dividend payments.
Western Digital’s strong balance sheet and cash flow provide it with the financial flexibility to undertake shareholder-friendly initiatives as well as scope for product and geographical expansions. The company — one of the leading storage solution provider globally — generated operating cash flow of $1.07 billion in the first six months of fiscal 2015, ending the period with cash and cash equivalents of nearly $4.9 billion.
Some other companies with a consistent track record of returning excess cash through share repurchases and dividend payments are Yahoo! Inc. (YHOO), SanDisk Corporation (SNDK) and Accenture plc (ACN).