Our analysis is based on comparing Brocade Communications Systems, Inc. with the following peers – NetApp, Inc., Quantum Corporation, HP Inc., Western Digital Corporation, International Business Machines Corporation, Juniper Networks, Inc. and Cisco Systems, Inc. (NTAP-US, QTM-US, HPQ-US, WDC-US, IBM-US, JNPR-US and CSCO-US).
Brocade Communications Systems, Inc.’s dividend yield is 1.76 percent and its dividend payout is 75 percent. This compares to a peer average dividend yield of 2.43 percent and a payout level of 44.42 percent. This combination of a relatively lower dividend yield and a higher payout ratio suggest that the dividend payout might not be sustainable. The contra-indicator here is the relatively strong dividend quality score of 75 out of a possible score of 100, which points to some ability to sustain the higher payout ratio.
Dividend Quality Overview
- Over the last twelve months (prior to January 31, 2017), BRCD-US paid a medium quality dividend, which represents a yield of 1.68% at the current price.
- Dividend quality trend has not been consistent over the last five years. Dividends were paid during 3 of these years — of these 2 were high quality and 1 was medium quality.
- The ending cash balance, with a dividend coverage of 14.03x, provides a substantial cushion in case of a significant reduction of cash flows in the future.
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Over the last twelve months (prior to January 31, 2017), BRCD-US paid a medium quality dividend.
The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 3.36x), investing cash flow (coverage of -5.47x), issuance cash flow (coverage of 1.28x) and twelve-month prior cash (coverage of 15.88x), for a total dividend coverage of 15.03x.
BRCD-US‘s issuance cash flow includes outflows from net share buybacks (coverage of -7.29x). Thus, the total coverage including share buybacks is 22.32x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.
These coverage ratio factors imply that the firm’s net cash inflow from issuance was required (in addition to operating and investment cash) to pay the dividend, which suggests a medium dividend quality.
|Dividend Yield (%)||0||0||0.66||1.56||2.4||1.76|
|Dividend Payout (%)||0||0||13.21||20.25||39.22||75|
A complete list of metrics and analysis is available on the company page.
Brocade Communications Systems, Inc. engages in the provision of innovative network solutions. It supplies networking hardware and software, including Storage Area Networking solutions and Internet Protocol networking solutions for businesses and organizations worldwide. It operates through the following segments: Storage Area Networking Products, Internet Protocol Networking Products, and Global Services. The Storage Area Networking Products segments include infrastructure products and solutions that assist customers in the development and delivery of storage and server consolidation, disaster recovery and data security, and in meeting compliance issues regarding data management. These products are used to build storage area networks and are generally used in conjunction with servers and storage subsystems, Storage Area Networking interconnection components such as host bus adapters and server and storage management software applications and tools. The Internet Protocol Networking segments products include Layer 2 and Layer 3 Ethernet switches and routers that are designed to connect users over private and public networks, including local area, metro, and within & across global data centers. Global Services segment include break and fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support revenue. Brocade Communications Systems was founded by Paul R. Bonderson, Jr., Kumar Malavalli and Seth D. Nieman on August 24, 1995 and is headquartered in San Jose, CA.
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