NETAPP INC (NASDAQ:NTAP) – A Reliable Dividend Stock with Strong Profitability

NETAPP INC (NASDAQ:NTAP) was identified as a strong dividend candidate by our Best Dividend Stocks screener. The company combines a solid dividend profile with healthy profitability, making it an interesting option for income-focused investors.

Dividend Strength

• Dividend Yield: NTAP offers a yield of 2.08%, slightly below the industry average of 2.74%, but still competitive compared to the S&P 500 average of 2.36%.
• Reliable Track Record: The company has paid dividends for at least 10 years without reductions, indicating stability.
• Sustainable Payout: Only 37.2% of earnings are allocated to dividends, leaving room for future growth and financial flexibility.
• Modest Growth: Dividends have grown at an annualized rate of 4.43%, suggesting cautious but consistent increases.

Profitability Highlights

• Strong Margins: NTAP boasts a Profit Margin of 17.47% and an Operating Margin of 21.48%, outperforming most peers in the Technology Hardware sector.
• High Returns: The company delivers a Return on Equity (ROE) of 114.27% and a Return on Invested Capital (ROIC) of 22.77%, well above industry averages.
• Cash Flow Stability: Positive operating cash flow over the past five years reinforces dividend sustainability.

Financial Health Considerations

• Debt Management: While the Debt/Equity ratio of 1.25 is elevated, free cash flow covers debt comfortably, with a Debt-to-FCF ratio of just 1.58.
• Liquidity Concerns: A Current Ratio of 0.93 suggests short-term liquidity constraints, though the company remains solvent with an Altman-Z score of 2.75.

Valuation

NTAP trades at a P/E ratio of 14.22, below both the S&P 500 (26.70) and industry average (15.64), indicating reasonable pricing relative to earnings.

For a deeper dive, review the full fundamental report on NTAP.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.