There was an earthquake yesterday in California. I live in Florida and I just happened to be on a video call with a guy in Orange County at the time of the earthquake. He told me there was an earthquake and I thought he was just joking. Once he grabbed hold of his desk and I heard glass breaking I figured it was in fact an earthquake. That was pretty intense. I would imagine Garmin (GRMN) felt a similar shock today as the stock was rocked by a 22% downturn. Has Garmin lost its way?
It turns out Garmin announced earnings for their second quarter today. The company reported profits of $256 million ($1.19 per share) versus $214.4 ($0.98 per share) a year ago. That sounds good until you realize they only earned $0.92 per share excluding items. Sales were also up but did not meet expectations from analysts.
The big news seems to be that Garmin is forecasting the personal navigation market to grow more slowly than was previously anticipated. There are also fears that with more rivals entering the fray, then this could put greater pressure on Garmin’s margins. On top of that, Garmin has delayed the launch of their NuviPhone.
The stock hit a new 52 week low today and is down 72% from its 52 week high. Garmin began distributing a dividend five years ago. The current dividend yield is sitting at just over 2%. The company has raised the dividend for the last three years from $0.25 to $0.50 and now it sits at $0.75. There is not much dividend history for the company. It will be interesting to see how they navigate the next few quarters. If they are able to keep a solid dividend and survive this economic climate, then there could be smooth roads ahead for the GPS maker.
I believe the company has a great potential market in smartphones. I have owned a few Garmin products and they are top notch. The problem is that by delaying their phone they have given Apple’s iPhone a huge head start. Nevertheless, Garmin may find a niche in the cellphone market creating another revenue stream for the company. The iPhone is exclusive to AT&T here in the United States, so if Garmin can make a decent navigation phone for the other cellphone operators then we may see an explosion in profits.
I am watching Garmin closely to see how the next couple of quarters shake out.
(GRMN: 15.22, 0.00%, Yield: N/A%)
July 31st, 2008 at 7:09 pm
That must have been freaky, watching that guy go through the earth quake. Do you see Garmin as a Dividend play or a value play?
Best Wishes,
D4L
August 1st, 2008 at 10:44 am
Hello,
Sorry to post this here, but I like your Dividend Tool but it appears that often, the stock has a split and the dividend appear to fall down from 40-50% (try with PLC for example).
May I suggest to add another column to your tab, with this header GROWTH WITH SPLIT AUTODETECTION (may be wrong). If the dividend appear to fall down from 30%-50%, you consider it is a stock split and calculate growth accordingly.
Regards from France
August 1st, 2008 at 12:48 pm
It was pretty crazy.
I think Garmin is more of a value play than a dividend play. I would suspect with the stock falling like this we should see a share repurchase and perhaps another dividend bump.