Shares jumped after Garmin(NYSE: GRMN) announced its third-quarter earnings this morning. The maker of GPS-enabled wearables and other outdoor activity instruments presented strong quarterly results that led investors to jump into the stock.
After spiking as much as 12.5%, Garmin shares held on to a gain of 10.5% as of 11:15 a.m. ET.
Raising full year guidance
With four of its five segments reporting record third-quarter revenue, and optimism for sales during the upcoming holiday season, management said it now expects higher full-year 2023 revenue and earnings per share than previous guidance. The company also generated more than twice the free cash flow than it needed to pay its quarterly dividend. That's what income investors want to see. It's likely contributing to the stock move, as it implies the dividend is safe and could grow.
Management said that consumers continue to crave its fitness GPS watches and that sales grew 26% in that category year over year. That segment, along with outdoor, aviation, and marine, is driving Garmin's profitability. But even its automotive segment increased quarterly sales by 59%, coming closer to contributing an operating profit.
Expect dividends to grow
Garmin also has a pristine balance sheet with $2.8 billion in cash and marketable securities along with no debt at the end of the quarter. That puts the company in a good position to raise its dividend next year for the fifth time in five years. That dividend now has an annual yield of about 2.5% after today's stock move.
With Garmin continuing to grow product sales across its segments, and the potential for dividend payouts to increase, the stock looks to be a good candidate for both growth and income investors. That helps explain its double-digit move today.
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Howard Smith has positions in Garmin. The Motley Fool has positions in and recommends Garmin. The Motley Fool has a disclosure policy.
