Last Wednesday, Corning Inc. (GLW) announced its latest regular quarterly dividend of 20 cents a share. That's the same as last quarter, and no surprise; given company history, the next dividend increase should come early in 2020. However, Corning also announced that its board of directors approved a new, $5 billion stock repurchase authorization.
In light of Corning's recent history the buyback authorization is not a surprise, either, but rather a continuation of the company's quest to return capital to shareholders. Since year-end 2012 Corning has reduced shares outstanding by nearly 48%, from about 1.5 billion shares to 784 million at the end of the latest quarter. Since 2011 Corning has quadrupled the quarterly cash dividend from five cents a share to the current 20 cents, representing a compound annual growth rate of nearly 19%. Corning also has stated its intention to continue increasing the cash dividend by at least 10% a year. The intent is to return another $8 billion to $10 billion to shareholders through dividends and buybacks from 2020 to 2023, with buybacks in the range of $5 billion to $7 billion.
For illustration purposes, let's assume Corning can buy back $5 billion of its stock by 2023 at the current price (actual repurchase prices will fluctuate, of course, but I want to keep this simple). Its shares outstanding would be reduced by another 150 million shares. By then, quarterly dividends per share would be in the range of 27 cents -- that is, if Corning can deliver 10% annual dividend growth.
Currently yielding 2.4%, and trading at about 15x next year's consensus estimates, GLW continues to fly under the radar. The company is expected to report third-quarter earnings later this month, with consensus estimates calling for earnings per share of 45 cents on revenue of $2.98 billion.
Corning somewhat quietly has become a dividend champion while simultaneously buying back a significant amount of its shares. That combination can be very powerful.