Three Dividend Stocks With No Debt
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
During the US financial crisis, the companies with high debt on their balance sheets had to face some serious situations which impacted shareholder returns. In my article today, I have selected three stocks which have no debt at all on their balance sheets. Instead of debt, these companies focus on high liquid assets to fund acquisitions and other future investments for growth. Also I have considered insider ownership as a factor while choosing these stocks as they are more likely to approve special dividends because the owners will get the most benefit. The combination of a higher percentage of insider ownership, zero-debt balance sheets and good dividend figures make these companies as favorable among the income investors. These stocks also have good growth prospects and can be attractive for long-term investments. Have a look at the below mentioned table for the figures.
Let's take a look at these three stocks in more detail.
Marvell Technology Group
Despite its disappointing 3Q12 results and falling stock price, this chip maker has produced adequate cash to keep itself debt free and declared a sustainable dividend. The company operates in various segments, but the majority of its revenue comes from its chips used in traditional hard drives. And, with the shift in technology towards Smartphones and Tablets the company has faced a decline in its earnings. However, with its diverse portfolio, it is all set to produce a major turnaround for 2013. The company has a strong presence in China and it wants to further expand to benefit out of the world’s largest consumer electronic market. It announced a wide array of solutions on the key platforms of Smartphones, Smart TVs and Cloud Infrastructure at the PT/Expo Comm China 2012 to enhance its portfolio.
The most nearby growth driver for Marvell is its recently launched single unified 3G platform for TD-SCDMA and WCDMA. There is a lot of optimism around this as the major OEMs are expected to design smartphones around this platform. The dual core 3G platform is important for mobile devices for an improved performance along with high-end graphics and HD video capabilities. This is surely going to drive its revenue growth in the first half of 2013. Marvell is also aiming at capturing ~10% of WCDMA market by 2013.
Apart from this, the company has an excellent history of maintaining a strong financial position. Marvell has a comfortable ~44% of its market cap in cash along with zero debt on its balance sheet. Moreover, the company is very loyal to its shareholders by passing on higher benefits to them. Considering its near-term and long-term growth opportunities in the unified platform for the mobile market and a growing networking segment along with a stable financial outlook, investors will be placing a safe bet with this stock.
The next in my list is Garmin Ltd, which is a provider of navigation devices to various industries. Like Marvell, Garmin is also carrying zero debt on its balance sheet. However, it has a more attractive dividend yield of ~4.4% and a higher payout ratio of 57%. The company recently announced that it will be a part of the S&P 500 index now onwards which will surely attract many new investors. Garmin has a high exposure to the auto industry and it offers a wide range of automotive navigation products. With the recovering US economy, the automotive sales are gaining back momentum which will definitely help Garmin to increase its revenue.
Along with this, the company is focusing on expanding its geographic reach to create more opportunities for growth even when one of the regions faces adverse market conditions. The company is targeting Asia to boost up its market share of the PND (Personal Navigation Devices) segment for long-term growth. It launched two new devices in the affordable segment to increase its share in India to ~30% (from 15% currently). After the launch of these products, Garmin entered into an agreement with AutoForm to distribute its products in North India. The GPS market is growing rapidly with a huge demand of 1 lakh devices especially in cities like Delhi and Chandigarh. Looking at this, the company’s step to sign the agreement is in the right direction and it will be able to enhance its profitability. I feel Garmin has a solid ability to generate cash and deliver great returns to its shareholders in the future also.
The third stock is Activision Blizzard which is the world’s second largest gaming company in terms of revenue. The company has a higher insider ownership of 62% which makes it more likely to declare special dividend. The company has strongly benefited from its top-selling game 'Diablo III' in North America and Europe in its 3Q12 and it posted ~12% y/y increase in its net revenue. Activision is well positioned for the future growth as well with its highly popular franchises such as Call of Duty, Diablo and Skylanders. The online games are gaining popularity in China and to tap this market, the company entered into a partnership with Tencent which is a leading internet service provider there. Under this partnership, Activision will get exclusive rights to launch its leading video game franchise 'Call of Duty Online' in China. This will be a great opportunity for both the companies looking at their track records of innovative products.
Alongside, Activision also has its focus on expanding its portfolio of games to boost up its top-line growth in the long run. Its Skylanders franchise has been always a cash-spinner for the company. The company also sells physical models of this game's characters which have led to a massive increase in its revenue. To further leverage on this franchise, Activision recently launched two new titles 'Skylanders Lost Islands' and 'Skylanders Battlegrounds'. I expect the company to maintain double-digit revenue growth for this franchise for the next three years.
To conclude, I feel these three stocks are poised for a stable growth in the future. And, the icing on the cake is their healthy balance sheets. I recommend buying these stocks for stable dividends.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard. Motley Fool newsletter services recommend Activision Blizzard. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!