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Обзор Dycom Industries: internet connection and future dividends
Dycom Industries (NYSE: two) - American engineering company, working in the field of telecommunications. The company's business is stable and may well start paying dividends. But the company's shares look overbought..
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
What do they earn
According to the company's annual report, its revenue is formed from the following types of services:
- Engineering services. Planning and design of telecommunications infrastructure.
- Construction, installation and maintenance. Actually, these are physical actions, usually following design.
Unfortunately, not written in the report, what kind of occupation how much revenue the company brings and, no less important, what is the marginality of these activities. By types of customers and contracts, revenue is divided as follows::
- telecommunications - 89,1%. The company's customers are from the telecommunications industry;
- engineering and design work for housing and communal services — 7,2%. As a matter of fact, same, as above, but in specific industry conditions;
- construction and maintenance of electrical infrastructure- and gas supply 3,7%.
The company operates only in the USA.
Arguments in favor of the company
No reason to worry. According to the company, by 2025 60% American households will be connected to fiber-optic internet - against 32% in 2020. The need of these same households for stable and strong Internet traffic is growing, so even if Dycom's business doesn't show stunning growth rates, it will remain fairly stable, what can attract a lot of investors to these stocks.
Yet again, I would not hope to increase the company's revenue and profit tenfold, but it will give her business sustainability and stability. As existing, Internet infrastructure that has not yet been built will require maintenance, and after a number of years - and reconstruction. It's all good for Dycom.
Biden Plan — Dycom Victory. Also, the company's business will be facilitated by the presence of $ 65 billion in Biden's infrastructure plan to expand the access of the US population to the Internet.
There is a lot of work to be done here, so participating in these programs will bring Dycom a lot of benefits - since it has representatives almost all over America and will take advantage of this opportunity.
Relative cheapness. Company P / S less 1, and its capitalization is approximately 2.96 billion dollars. This basically makes it attractive for retail investors., and for potential buyers from among large telecommunication holdings.
Dividends. At the moment, the company does not pay dividends, but could. Quite possible, that some activist investor could soon buy a stake in the company, which would require Dycom management to start paying dividends. For example, at level 2-3 $ per year - this is 2-3% per annum, which will be 60-80% of the company's profit. In terms of finances, this will be quite a feasible burden for the company.: Dycom has an estimated $1.393 billion in debt, of which only 393.153 million. On the other hand, a potentially large payout of 2-3% per annum will make it possible to catch up with lovers of passive income in these shares..
This, certainly, hypothetical possibility, but, in my opinion, there are prerequisites: the company's business is quite stable, but the shareholders get practically nothing from this.
What can get in the way
Expensive. The company P / E - 68,91 - this is indecent a lot. This alone will make her shares volatile. After all, eventually, it’s just a business that is actually at the level of sysadmins or even plumbers with low margins - and the lack of prospects for its significant increase. Also, such a price will greatly limit the potential premium to buy a company - of course, when, if there is a buyer.
Concentration. According to the company's annual report, a huge percentage of its revenue comes from contracts with large clients: Verizon 18,8%, Lumen Technologies 16,9%, Comcast 16,7%, AT&T 16,7%.
Basically, the presence of such giants in the number of clients is a kind of plus: this will maintain the stability of Dycom's business. After all, all these companies need to maintain and expand their huge telecom infrastructure.. But at the same time, their very size allows them to dictate prices to Dycom., that's why Dycom has such a low bottom line margin: less 1,5% from proceeds.
Well, there are always theoretical risks., that one of the big clients will leave and this will be reflected in Dycom's reporting. Finally, she has a lot of competition: Black Box, MasTec, Aegion, Michels, Rosendin Electric, Intren и Lamprell.
Dividends. The last 10 years the company has been actively spending on updating its own funds and expanding its business. Actually, That's why she didn't pay dividends.. AND, maybe, therefore, it will never pay dividends and will limit itself to repurchasing shares, no matter how scandalous activists-investors.
And without dividends, these shares do not look particularly interesting.. Yes, there is stability and growth prospects, but not very big.
It may also turn out, that Dycom will introduce dividends, but in a more modest form - something at the level of 0.5-1% per annum. In this case, I would not expect a significant influx of investors into these shares..
All the positive has gone down the drain.. Over the past two years, the company's shares have risen by almost 100%, and this at the same time, that its revenues and profits have not grown. Understandably, what investors expect for the company of pluses from Biden's infrastructure plan, but these advantages are not realized soon and not immediately in full.
Now the company's shares look too expensive, because all the positive quotes are already included. When, if the advantages expected by investors are not realized soon or the result will be more modest than expected, shares will shake.
Resume
At the moment, Dycom looks too expensive - all the positives in the stock are already included. So I would expect the quotes to fall somewhere to the level 60 $. And if I invested in these stocks now, then only with an eye on that, that the company will be attacked by an activist investor, requiring dividends.
