Richardson Electronics Offers 32%-Plus 12-Month Total Return (RELL)

Richardson Electronics, Ltd. (NASDAQ:RELL) supplemented its annual $0.24 dividend payout with asset appreciation of nearly 30% over the past year for a total return of 32.4%.

The company’s share price spiked more than 17% in just the past two days of trading, which cut the forward dividend yield from 3.5% to the current 2.9%. Over the past two decades, the company managed to pay a steady dividend income and cut its annual dividend payout amount only once.

The company’s next ex-dividend date is set for February 8, 2018, and the pay date follows exactly four weeks later, on March 1, 2018.

Richardson Electronics Limited. (NASDAQ:RELL)

Headquartered in LaFox, Illinois, and founded in 1947, Richardson Electronics, Ltd. develops and manufactures power and microwave technologies, customized display solutions and healthcare equipment in North America, Europe, the Middle East, Asia Pacific and Latin America. The company operates through four business segments — Power & Microwave Technologies, Canvys, Powerlink and Richardson Electronics Healthcare.

The company distributes its current $0.24 annualized dividend amount in quarterly installments and offers a 2.9% yield at the current share price levels. After paying a flat $0.16 annual distribution for 17 consecutive years, the company cut the amount in half for 2008. Richardson Electronics paid the same $0.08 amount for the next two years and then tripled its annual dividend payout between 2011 and 2013. In 2014, the company resumed paying a flat $0.24 annual dividend amount.

The company’s current 2.9% yield is within 5.4% of the 3.1% average yield for the Electronics Wholesale segment. Compared to the 1.85% average yield of the entire Services sector, Richardson Electronics’ current 2.9% yield is almost 60% higher.

The share price started its current trailing 12-month period with a slow, eight-month decline of 14%. However, after hitting its 52-week low of $5.42 on September 8, 2017, the share price took off and soared higher. Just one month after its 52-week low, the share price had regained all its losses over the previous eight months and added another 25% to reach $6.75 by October 12, 2017. After the October spike, the share price experienced minor volatility, but recovered fully and was back at $6.75 by December 26, 2017. After December 26, the share price ascended an additional 21% and closed on January 12, 2018 at $8.16, which was almost 30% higher than the share price from one year earlier and more than 50% above the 52-week low from September 2017.

The share price lost more than two-thirds of its value between July 2011 and February 2016. Therefore, the current share price is 32% lower than it was five years ago, which translated into a 23.4% total shareholder loss over the five-year period. However, the share price has been rising since February 2016, so the three-year loss narrowed to just 10%. The share price rose significantly over the last year and turned the shareholder losses into a 32.4% total return for the shareholders that took a long position 12 months ago.

On January 11, 2018, the company announced very positive results for the second quarter of their fiscal 2018, which drove the recent two-day share price spike of 17%. Net sales for the quarter were 15.5% higher than net sales for the second quarter of 2017.

Gross margin as a share of net sales was higher than in the same period last year, but the increase was just 5.6%. Operating expenses for the current quarter were 6% lower than operating expenses for the same period of 2017. With higher sales and lower expenses, operating expenses as a percent of sales fell from 35.7% in the second quarter 2017 to the current 32.2%.

Company’s recent investments into growth initiatives seem to be returning positive results, which should translate into continued revenue and earnings growth. Edward J. Richardson, Richardson Electronics’ Chairman, CEO and President, stated, “Our investments in our growth initiatives are beginning to pay off complemented by consistently strong power grid tube sales.”

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