Agilent Technologies (A) raises dividend 15%, but valuation & yield are unattractive.

Agilent Technologies’ (NYSE:A) dividend was increased by 15%. Its overall yield is below that of the S&P 500 Index, at 1.19%. The firm has paid a dividend since April of 2012.

Agilent Technologies provides solutions that include instruments, software, services and consumables for the entire laboratory workflow. It has three segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and CrossLab. Agilent Technologies, Inc. was founded in 1999 and is headquartered in Santa Clara, California.

Agilent Technologies has maintained a three-year growth rate of dividends of 2 percent. Agilent Technologies currently ranks 2nd in yield within the large cap technology, scientific and technical category.

The quarterly dividend for the January payment will be $0.132 versus the prior year rate of $0.115 per share. Agilent Technologies, Inc. is not a member of our Top 100 Dividend Stock List (see below).

The dividend will be paid at the new higher rate on January 15, 2017, to shareholders of record at close of business on January 3, 2017. Agilent Technologies is currently priced at $44.48. Listed in the table below are the quarterly dividend payments since 2012.

Date Quarterly Dividend
1/3/2017 0.132
9/30/2016 0.115
6/30/2016 0.115
4/1/2016 0.115
12/31/2015 0.115
9/25/2015 0.1
6/26/2015 0.1
3/27/2015 0.1
1/2/2015 0.1
9/26/2014 0.094
6/27/2014 0.094
4/9/2014 0.094
12/27/2013 0.094
9/27/2013 0.086
6/28/2013 0.086
3/28/2013 0.086
12/27/2012 0.072
9/28/2012 0.072
6/29/2012 0.072
3/30/2012 0.072

Quantitative Analysis:

We examine Agilent Technologies upon our five key criteria, which include; 

Category Value Score
Dividend Yield 1.03% 369
Dividend Growth (3 to 6 year avg) 5.9%  292
Forward P/E 20.09  171
S&P Financial Rating BBB+ 160
Beta  1.20  125
Total Score   1,117

Additional quantitative information on P/S ratio and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr lowest Yield % 5 yr max Yield %
1.03% 2% 9.8% 12.75 3.49 1.12 3.67 0.92% 1.48%

Positives;

  • Agilent Technologies’ current dividend yield (1.03%) is near its five-year average, historical dividend yield (1.12%).

Negatives;

  • Agilent Technologies has paid out a dividend consecutively for only the last 4 years.
  • Agilent Technologies maintains a beta of 1.20, higher than the average company.
  • Agilent Technologies’ dividend yield is below that of the S&P 500 Index.
  • Agilent Technologies is trading at the top of its ten-year average price/sales (P/S) average.

Latest Earnings & Overall Analysis:

Agilent Technologies issued its earnings data on November 15th. The company reported $0.59 earnings per share for the quarter, missing the average estimate by 7 cents. Agilent’s Q4 2016 revenues were $1.11 billion, 6.4% sequentially and 7.3% year over year. This was above the average forecast in revenue of $1.06 billion.  The beat was largely the result of enhanced revenue across Asia. Agilent is well diversified with about two-thirds of sales from overseas markets. Asia sales are a big part of Agilent’s earnings and revenue. Asia contributed just over one-third of the Q4 revenue and climbed nearly 20% from last year’s Q4 results. Europe accounts for 27% of sales, but dropped 1.3% from last year.

Agilent is broken into three segments. Agilent’s Cross Lab Division had solid sales, up 8% to $370 million.  Its Life Sciences & Applied Markets Division also had good revenue growth at 6%. This division provides almost half of sales for Agilent. Sales from the Diagnostics and Genomics Group rose 8%, in-line with the other divisions at $193 million for Q4.  Operating margins across the board came in at just over 22%, up 2% from last year’s Q4.  Agilent maintains a solid balance sheet with an investment grade rating of BBB+. The firm maintains nearly $2 billion in debt, but maintains cash of $2.3 billion.

As for future guidance, Agilent offered sub-par comments on Q1 2017.   The firm expects revenues to come in at about $1.05 billion and earning per share of 49 cents. This was below expectations of 52 cents.  For the full year outlook,  revenues will come in at $4.37 billion while earnings per share at around $2.13. The full-year outlook was better than expected and offset the near term weak projections.

Agilent was turned itself into a diversified healthcare measurement firm after being spun out of Hewlett-Packard fifteen years ago. It holds top market share in many key categories and focuses on diagnostics, life science, and chemical analysis.  The firm is in a solid growth market and will continue to be a leading player in its three categories. Its diagnostic business is a key element to Agilent s growth, especially after the acquisition of Dako.  But its reliance on government and academic entities offers stable revenue, but less future growth prospects.  And, it must keep up acquisitions to fuel future revenue growth, although the Asia-Pacific region looks like a solid area for Agilent to continue increasing margins.

However, despite the solid prospects and stable revenue, Agilent is now priced at $44.50. At this price, Agilent trades at a rich 20 times next year’s earnings. It also trades at well over 3 times revenue. Unfortunately, like many other firm’s that offer solid growth, Agilent’s price has doubled since 2011 and gone up fourfold since 2009. It also offer a scant yield of just over 1%.

Based on the firm’s low dividend yield, high P/S ratio, and elevated forward P/E, Agilent Technologies does not qualify as a member of our  Top 100 Dividend Stocks

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Agilent Technologies Inc. Dividend Yield Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years.

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