Way to Stick It to Me, Seagate

Two days after talking up one of the smallest external drives you'll find, data storage specialist Seagate Technology (NYSE: STX  ) is ready to go big.

Late yesterday, the company issued upbeat fiscal third-quarter guidance and reinstated its dividend policy. Seagate quit paying dividends in 2009 to shave costs and avoid what appeared to be an irreversible slide toward bankruptcy.

No longer. Seagate expects $2.7 billion in fiscal third quarter revenue. Analysts had been calling for $2.62 billion in revenue, Barron's reports. The company's $0.18 per share dividend, payable on June 1 to those holding shares as of May 2, amounts to a 5% yield when annualized.

Neither EMC (Nasdaq: EMC  ) nor Western Digital (NYSE: WDC  ) -- Seagate's primary market foes -- pays a dividend, let alone one that yields almost as much as what dividend stalwarts AT&T and Verizon pay. Each telco offers a dividend yielding better than 5% at current prices.

Investors appear to find both Seagate's forecast and dividend enticing. Shares of the drive maker are up more than 8% as I write this, enriching common investors who've waited far too long to hear good news.

And yet there's unlikely to be anyone as happy as Seagate CEO Steve Luczo and his team. Luczo was a big buyer of his company's shares during the darkest days and still owns 1.29% of the shares outstanding, according to Capital IQ. His stake is worth a lot more today. Good. That's the way it should be.

Bravo, sir. I'm happy to eat my bearish words. Do you agree? Disagree? Let us know what you think about the data storage market, tech dividends, and Seagate's competitive positioning using the comments box below.

The Motley Fool recently introduced a free My Watchlist feature that allows users to stay ahead of the curve and receive up-to-date news on companies like Seagate Technology, or any of its competitors. To get the most recent Seagate news and analysis, add the company to your watchlist today:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of EMC and Western Digital and is also on Twitter as @TheMotleyFool. Its disclosure policy is out to lunch. Back in an hour.


Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 09, 2011, at 9:53 AM, sjlseagate wrote:

    tim...thanks for the article. you should check out Seagate's hydrid flash/hdd drives w/r/t a better alternative to SSD on notebooks. witihin 2 seconds of cold boot time on next gen (out soon) and 10x the capacity at half the cost of flash.

    and just to be clear, emc is a strategic partner not a foe....]

    steve

  • Report this Comment On April 09, 2011, at 10:26 AM, FoolSolo wrote:

    Good to see drive makers bouncing back. I still worry about Seagate's massive debt/equity at 1.05. The company was shopping itself out recently, and declined a whopping offer from WDC, which turned around and acquired Hitachi. We have yet to see how that plays itself out, but I'm much more comfortable with my WDC shares.

  • Report this Comment On April 14, 2011, at 5:30 PM, mikehof wrote:

    i think it is great that stx is going to be paying a dividend. i believe that most tech companies should. the excuse that they need to retain the capital for expansion is a joke. try building cars or trains. there are many capital intensive companys that have been paying dividends for years, why not tech. glad steve corrected the emc item. good luck.

    mike

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