Technology

Corning Plans to Keep Making Shareholders Richer With Buybacks and Dividend Hikes

Jon C. Ogg

Published: July 17, 2019 12:15 pm

Last Updated: January 30, 2020 6:28 pm

Corning Inc. (NYSE: GLW) is one of the old-world industrial companies that has been in the interest of the technology space for more than two decades now because it makes the screens for devices like TVs, monitors, smartphones and so on. Corning also acts differently than many technology companies, in part because it’s over 150 years old.

The company that used to be referred to as “Glassworks” by floor traders, hence its “GLW” stock ticker, already comes with a 2.4% dividend yield. That might not be the highest yield in technology or in industrials, but it is handily higher than the 10-year Treasury yield. It is also in the top half of the S&P 500’s dividend payers, and its yield is within the top 40% of all S&P 500 companies if you include the 85 or so members that still pay no dividend at all.

Where Corning has shined in the past and may continue to shine ahead is in share buybacks on top of dividends. “Glassworks” announced the same 20-cent dividend it has paid for the past two quarters, but the company is keeping well along its guidelines outlined in its Strategy & Capital Allocation Framework announced back in 2015 for the years 2016 to 2019. Corning showed that it surpassed its $12.5 billion goal in that period.

Corning’s board of directors now has approved a new $5 billion share repurchase authorization with an effective date of July 17, 2019. That prior Strategy & Capital Allocation Framework from 2015 is now being moved to the priorities for the years covering 2020 to 2023, as was introduced at Corning’s Investor Day back in June. This new plan sounds smaller, but Corning has shrunk its cash and investments and increased its long-term debt and other longer-dated liabilities since 2015 while it was returning more capital.

Since the plan was introduced in late 2015, through June of 2019, Corning has increased its dividend payout per share by 67% and reduced its outstanding common shares by more than 37%. As for the new $5 billion share buyback plan’s value against the whole company, Corning currently has a $25.8 billion market capitalization.

Along with factoring in close to a 20% static further reduction in its common shares outstanding, the 80-cent annualized dividend and even the 10% cumulative annual hikes ahead should easily be covered by its earnings. Corning had earnings per share of $1.78 in 2018, and Refinitiv’s consensus analyst expectations are for earnings to rise to $1.97 per share in 2019 and $2.22 per share in 2020. Revenue growth expectations are roughly 6% for 2019 and 2020 as well.

Corning has not yet been featured in our 2019 reviews of 10 stocks to own for the decade in companies like AEP, American Water Works and Cisco, but perhaps it should be. The company also comes with a discounted earnings valuation of about 16.5 times expected earnings.

Corning’s shares were last seen down about 1% at $32.95 on Wednesday, in a 52-week range of $27.67 to $36.56. Its consensus target price from Refinitiv is $36.77, and the street-high target price from sell-side firms is still $41.00.