Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.
Daktronics Inc. (DAKT) is a great company. Shareholders have been richly rewarded for owning the stock, ignoring random price fluctuations and focusing on what Benjamin Graham says matters - dividend returns and operating results. The table below summarizes annual dividend income over the last five years:
As you can see, the normal dividend has increased at a great rate, representing a 20% CAGR. The special dividends the last three years have really juiced returns for shareholders. I take special dividends as a sign that a company doesn't see opportunity to invest excess cash and is sticking to its core business.
The company is poised to benefit from continued expansion of large-scale displays in our everyday lives - along the road, at airports, even in major cities. It markets its product to governments, sports teams of all levels, and corporations. The economic downturn hit the company pretty hard, but business seems to be recovering. Here is a chart of revenue and cash flow since 2009:
Cash Flow From
Cash flow is expected to be stronger in 2013 than 2012 as a major contract was signed after quarter close, as disclosed in the results press release.
Getting back to Benjamin Graham's advice to focus on dividends and operating results: Dividends are an undoubted bright spot for this company. The growth rate and special dividends have been great for shareholders. Revenue has recovered nicely since the economic downturn and cash flows have been strong, until 2012. I trust management to improve cash flows in 2013 and use declaration of a special dividend and/or increasing the regular dividend as my barometer. Since 2012 results, the company paid a $0.50/share special, which signals to me that business is improving.
From the DAKT website about what it does and a brief history:
"Though Daktronics may not be a household word, the company is recognized worldwide in its industry as the leading designer and manufacturer of electronic scoreboards, programmable display systems, and large screen video displays using light emitting diode (LED) technology. Other product lines include integrated sound systems for sports facilities and hoists and rigging systems for theatres and other entertainment and sports facilities.
Daktronics was founded in 1968 and has close ties to South Dakota State University in Brookings, S.D. As a manufacturer and technical contractor, Daktronics provides standard display products as well as custom-designed and integrated systems. The company excels in the control of large display systems, including those that require integration of complex multiple displays showing real time information, graphics, animation and video. Every day, in nearly 100 countries around the world, millions of people depend on Daktronics scoring and display systems for information.
Daktronics has experienced significant growth over the past 41 years but the values this company was built on remain its constant foundation."