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Corning (GLW) Rewards Shareholders With Modest Dividend Hike

Corning Incorporated GLW recently hiked its quarterly dividend payout by about 3.7% to 28 cents per share or $1.12 on an annualized basis. The news seemed to have struck the right chords with investors as the firm’s share price appeared to rise in the pre-market trading.

Based on the closing price of $35.14 on Feb 8, 2023, the proposed dividend affirms a yield of 3.2%. A steady dividend payout is part of Corning’s long-term strategy to provide attractive risk-adjusted returns to its stockholders. Additionally, healthy dividend increases at periodic intervals have been one of its key strengths.

A few days earlier, Corning reported healthy fourth-quarter 2022 results, wherein both the bottom line and top line beat the Zacks Consensus Estimate. It is benefiting from improved demand and commercialization of its innovations. Its capabilities are becoming increasingly vital to diverse industries. Multiple factors should drive Corning’s fiber optic solutions business over the next several years, primarily the increasing use of mobile devices that require efficient data transfer and efficient networking systems. Supporting this trend is the proliferation of clouds, resulting in increased storage and even computing on a virtual plane.

Since both consumers and enterprises are using the network more, there is tremendous demand for quality networking. Also, data consumption patterns are changing. For instance, there is a growing propensity to consume video content, thus creating the need for faster data transfer. Since optical networks are more efficient and most of the existing networks are copper-based, the demand for optical solutions is particularly strong. Corning has several products focused on the datacenter with a portfolio consisting of optical fiber, hardware, cable and connectors that helps it to create optical solutions to meet evolving customer needs.

5G, broadband and cloud computing continue to drive strong growth across the Optical Communications segment. Corning recently introduced high-performance cellular solutions to help network operators bring reliable 5G connection indoors with small-cell radio nodes that are easy to install and cost-effective. The in-building cellular products are part of Corning’s Everon Network Solutions — a suite of optical network components for enterprise deployment.

In Specialty Materials, Corning is witnessing significant demand for its premium cover materials and advanced optics products, driven by strength in the IT, mobile device and semiconductor markets. It is a leading innovator in the glass substrate industry. The company has been developing formulations that are not only suitable for imparting superior picture quality but also taking care of their effects on the environment.

Corning’s generation 10 substrates use the proprietary EAGLE XG formulation, which serves both these purposes. It was the first glass substrate developer with the generation 10 capability. A higher-generation substrate is a larger-sized substrate, which enables panel makers to reduce manufacturing costs since more panels can be built from each substrate. Corning’s capability positions it to better serve the secular increase in demand for LCD panels. The company’s fusion technology reduces glass thickness, enabling panel manufacturers to do away with thinning costs that are usually necessary for making slimmer, lighter and more power-efficient consumer devices. Also, the company’s Iris glass presents a significant growth opportunity.

All these positives and sound financial management probably led to the quarterly dividend hike.

Corning currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

Motorola Solutions, Inc. MSI carries a Zacks Rank #2. It has a long-term earnings growth expectation of 9% and delivered an earnings surprise of 6.6%, on average, in the trailing four quarters.

As a leading provider of mission-critical communication products and services worldwide, Motorola has ensured a steady revenue stream from this niche market. The communications equipment maker intends to boost its position in the public safety domain by entering into strategic alliances with other players in the ecosystem.

Viavi Solutions Inc. VIAV, carrying a Zacks Rank #2, is another key pick. Headquartered in Scottsdale, AZ, Viavi is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.    

Viavi also offers high-performance thin film optical coatings for light-management solutions used in anti-counterfeiting, 3D sensing, electronics, automotive, defense and instrumentation markets. It delivered an earnings surprise of 9.1%, on average, in the trailing four quarters.

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