LSC Communications (NYSE:LKSD) raised its quarterly dividend by 4% to $0.26 per share, yielding around 7%. Its share price rose almost 20% since it increased the quarterly dividend and announced stronger than expected results for the fourth quarter. The stock has the 52-week trading range of $11 to $28 – with the market capitalization of $469 million.
Based in the United States, LSC Communications is a printing services provider. Recently, the company acquired Clark group, Fairrington Transportation and new wide-web gross press and high-speed binding Line.
The company has also acquired Quality Park envelope business in the final quarter of last year to support its top Office Products segment.
Though LSC has to invest significantly in organic and inorganic growth opportunities to support the revenues, its strong cash generation potential allows it to support the investments and cash returns for investors.
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In the latest quarter, LSC revenues increased 9% to $999 million compared to $919 million in the same period last year, thanks to recent acquisitions. Its non-GAAP adjusted EBITDA was standing around $85 million, higher from $80 million in the past year quarter.
“We are very pleased with our free cash flow generation in the fourth quarter, and despite continued challenging industry conditions, we delivered increases in non-GAAP adjusted EBITDA and non-GAAP earnings per share,” said Thomas J. Quinlan III, LSC Communications’ Chairman and Chief Executive Officer.
On the back of improving sales and earnings, LSC Communications generated free cash flow of $138 million in the fourth quarter, when its dividend payments were standing close to $34 million. Thus, the company’s free cash flows were not only sufficient to cover the dividend; free cash flows also offered the room for investment in growth opportunities.
Moving forward, LSC Communications expects to generate net sales in the range of $3.9 million, while the company anticipates free cash flows in the range of $160 million compared to dividend payments of $36 million. Apparently, its dividend is safe considering the huge gap in free cash flows and dividend payments.
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