Drive-ing Growth

Data storage specialist Seagate Technology (Nasdaq: STX) can be a volatile stock, soaring when computer memory prices are high and swooning when the market is flooded with memory and prices are low. Recently, for example, with NAND memory supplies tight and hard drive prices rising, Seagate stock has surged — rising more than 80 percent over the past year.

Seagate has been going through a brutal period. Revenue fell by 19 percent between fiscal 2015 and fiscal 2016 as volumes and prices both slumped under the weight of declining demand for PCs. Momentum has been shifting for the better lately, though. Revenue ticked higher by 3 percent last quarter (over prior-year levels). CEO Steve Luczo and his executive team say they’re seeing signs that the business is stabilizing. They also believe that Seagate’s lower cost structure and improved portfolio of high-capacity drives should drive stable growth over the coming years.

Seagate’s stock may not seem bargain-priced with its recent priceto-earnings (P/E) ratio of 17, but analysts expect strong growth, with earnings more than doubling over the coming five years. On top of that, patient investors can enjoy a hefty dividend that recently yielded 5.9 percent while they wait for long-term price appreciation. With Seagate generating more than $1 billion in free cash flow annually, the company looks poised to continue dividend payments.