Garmin (GRMN 8.82%) stock was the leading gainer in the S&P 500 index in early trading today. The maker of wearables and other fitness and outdoor activity devices delivered a fourth-quarter and full-year earnings report that even beat its own expectations.

Garmin shares were trading near the day’s high, up by 10.9% at 11:10 a.m. ET. The stock has risen more than 40% over the past year.

Rising revenue and EPS

Garmin began 2023 telling investors that revenue was likely going to be flat for the year. But its estimates for sales and earnings per share (EPS) grew as the year progressed. Revenue projections increased from $5 billion to $5.15 billion by the third quarter. But today the company reported revenue of $5.23 billion after a strong fourth quarter.

Even more exciting for investors was management’s guidance for 2024 sales of $5.75 billion, representing growth of 10%. Three of the company’s five business segments — aviation, marine, and automotive — recorded record sales in 2023, and the company says that momentum will continue. It also has new product launches planned for 2024.

Cash is king

The company also announced a proposed hike to its dividend of 3% and said a $300 million share buyback had also been approved by Garmin’s board of directors. The company can afford to buy back those shares and boost the dividend thanks to its strong cash flow.

Garmin generated more than $400 million in free cash flow in the fourth quarter while paying just $140 million in dividend payments. If you think cash is king, Garmin stock should be in your portfolio. On top of its cash-generating capacity, the company has cash and marketable securities of over $3 billion on its balance sheet. Shareholders are likely to benefit from that, whether it’s used to grow the business or for future dividends and buybacks.

Source link