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.
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.
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