Amid uncertain macroeconomic conditions, investors should take advantage of a fundamentally strong and dividend-paying stock, Motorola Solutions, Inc. (MSI), which ensures a stable, growing income stream.
During the third quarter of fiscal 2022, communications solutions provider MSI paid nearly $132 million in cash dividends. The company has a record of increasing its dividends for ten consecutive years. On November 17, 2022, its board of directors raised its regular quarterly dividend by 11% to $0.88 per share, payable in cash on January 13, 2023.
MSI pays a $3.52 per share dividend annually, which translates to a 1.33% yield on the current share price. Its four-year dividend yield is 1.42%. The company’s dividend payouts have grown at a CAGR of 11.4% over the past three years and 11% over the past five years.
MSI reported impressive third-quarter financial results, with record sales in both segments — Products and Systems Integration; and Software and Services. The company’s sales were $2.4% billion, up 13% year-over-year, driven by growth in North America and internationally.
Greg Brown, MSI’s Chairman, and CEO, said, “We continue to see exceptionally strong demand for our solutions and a robust funding environment. I’m particularly pleased that the investments we’re making in video security and access control continue to drive outstanding growth.”
Given its strong business momentum, the company raised its full-year 2022 revenue and earnings outlook. The company now expects revenue growth between 9.25% and 9.5%, up from its previous guidance of 8%.
Also, the company’s non-GAAP EPS is expected to come between $10.17 and $10.22 per share, compared to its prior guidance between $10.03 and $10.13 per share.
Shares of MSI have gained 21.6% over the past six months to close the last trading session at $263.84.
Here is what could influence MSI’s performance in the upcoming months:
Positive Recent Developments
On December 20, 2022, MSI announced that it had received Joint Interoperability Test Command (JITC) certification from the U.S. Defense Information Systems Agency (DISA) for its Federal Information Processing Standards (FIPS)-compliant Avigilon video security solutions.
“JITC certification from DISA highlights Motorola Solutions’ commitment to supporting our customers with security solutions that meet exacting criteria and can be trusted to help protect their operations,” said Joe Balchune, MSI’s vice president of Federal Markets.
In October, MSI acquired Futurecom Systems Group, a leading provider of radio coverage extension solutions for public safety agencies based in Ontario, Canada. Futurecom designs and manufactures in-vehicle, fixed, and portable radio frequency (RF) repeaters and extenders exclusively for MSI’s radio networks and devices.
Robust Financials
For the fiscal third quarter ended September 30, 2022, MSI’s sales increased 13% year-over-year to $2.40 billion. The company’s sales from the Products and Systems Integration segment grew 15% from the prior-year period to $1.53 billion, while sales from Software and Services segment rose 8% year-over-year to $844 million.
In addition, MSI’s non-GAAP EPS came in at $3, up 28% year-over-year. Its operating cash flow was $388 million, compared to $376 million in the year-ago quarter. Also, the company generated a free cash flow of $318 million, compared to $315 million a year ago.
Favorable Analyst Estimates
Analysts expect MSI’s revenue for the fiscal year (ended December 2022) to come in at $8.94 billion, indicating an increase of 9.4% year-over-year. The consensus EPS estimate of $10.20 for the same year indicates an 11.5% increase. Also, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 6.7% and 9.8% from the previous year to $9.54 billion and $11.20, respectively.
High Profitability
MSI’s trailing-12-month EBIT margin of 19.97% is 201.5% higher than the 6.62% industry average. Its trailing-12-month EBITDA margin of 25.05% is 114.7% higher than the 11.67% industry average. Likewise, the stock’s trailing-12-month net income margin of 13.47% is 317.9% higher than the industry average of 3.22%.
Furthermore, MSI’s trailing-12-month ROTC and ROTA of 18.32% and 10.11% compare to the industry averages of 3.24% and 1.52%, respectively.
POWR Ratings Show Promise
MSI has an overall rating of B, translating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. MSI has a B grade for Sentiment, consistent with the optimistic analyst estimates. Also, it has a Quality grade of B, in sync with its higher-than-industry profitability metrics.
MSI is ranked #11 out of 48 stocks in the Technology-Communication/Networking industry.
Beyond what I have stated above, we have also given MSI grades for Value, Growth, Momentum, and Stability. Get access to all MSI ratings here.
Bottom Line
MSI reported outstanding third-quarter financial results. Moreover, the company’s strong demand for solutions and a stable funding environment indicate its promising growth prospects. Given its strong business momentum, the company raised its revenue and earnings expectations for the full-year 2022.
The company’s financial discipline positions it to pay increasing dividends to shareholders. Amid uncertain macroeconomic conditions, adding this high-yield dividend-paying stock to your portfolio could be wise for passive income.
How Does Motorola Solutions, Inc. (MSI) Stack up Against Its Peers?
MSI has an overall POWR Rating of B. One could also check out these other stocks within the Technology - Communication/Networking industry with an A (Strong Buy) rating: Cisco Systems, Inc. (CSCO), Extreme Networks, Inc. (EXTR), and AudioCodes Ltd. (AUDC).
MSI shares were unchanged in premarket trading Monday. Year-to-date, MSI has gained 2.38%, versus a 1.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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