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Xilinx Announces New Share Repurchase Program worth $1B

California-based semiconductor maker, Xilinx Inc. XLNX recently announced that its board of directors has approved a new share repurchase authorization of $1 billion. However, management stated that the timing and number of shares to be bought will depend upon prevailing market conditions as well as other factors.

Xilinx has a steady track record of returning value to shareholders through share repurchases and dividend payouts. Over the last 10 years, the company has returned approximately 100% of its operating cash flow to its shareholders and has repurchased approximately $1.8 billion of its common stock since 2010.

Furthermore, Xilinx has regularly paid quarterly cash dividends for the past 11 years. The company started paying 5 cents per share as quarterly dividend in fiscal 2004 and has raised the amount every year to the present level of 33 cents. This represents a compounded annual growth rate of 17%.

During the recently concluded fiscal 2016, Xilinx returned approximately $443 million and $319 million to shareholders through share buyback and quarterly dividends, respectively.

The company’s strong balance sheet and cash flow provide it with the financial flexibility to undertake shareholder-friendly initiatives and scope for product innovation and expansion in newer markets. The company generated operating cash flow of $730 million in fiscal 2016 and ended the period with cash, cash equivalents and short-term investments of nearly $3.34 billion.

Some other companies that have a consistent track record of returning value through share repurchases and dividend payments include Yahoo! Inc. YHOO and Accenture plc ACN.

We believe that such initiatives not only enhance shareholder return but also raise the market value of a stock. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Xilinx remains confident on its growth potential, thereby raising hope for further rise in shareholder value.

However, a soft revenue guidance for the first quarter of fiscal 2017 keeps us concerned about the company’s near-term growth prospects. Moreover, a slowdown in the Chinese economy, along with economic weakness in Europe and the Asia-Pacific, could impact Xilinx’s near-term results. Stiff competition from Lattice Semiconductor Corporation LSCC is another material headwind.

Xilinx currently carries a Zacks Rank #3 (Hold).

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