Seagate Technology (STX) Payout Unlikely to Drop - RBC

Over the last 5 years, Seagate Technology (NASDAQ: STX) has averaged 33% dividend payout and been able to maintain an attractive dividend yield given strong FCF support. Over the last few quarters we saw the FCF fall from ~$615M in Sept-2015 to $245M in Dec-15 and $110M in March-16. This resulted in the payout ratio getting to 77% and 171% for the last two quarters. While a >100% payout isn’t sustainable nor a viable option, the company believes their FCF is artificially tempered by a host of issues that should get rectified over the next 12-18 months via an aggressive cost take out plan that should enable more stable and higher FCF generation. RBC analyst, Amit Daryanani, estimates should STX achieve its targeted profile, the payout ratio would be ~80% in FY18.

No change to Sector Perform rating or price target of $24.00.

For an analyst ratings summary and ratings history on Seagate Technology click here. For more ratings news on Seagate Technology click here.

Shares of Seagate Technology closed at $22.72 yesterday.

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