Can Seagate (STX) Keep It's Big, Fat, Juicy Dividend After The Major Restructuring?

Yielding 10.5% based on last night's close, Seagate's (NYSE: STX) dividend yield signaled a major red flag as being too good to be true with fears of being cut. However, with last night's massive restructuring and solid revenue guidance fears of a dividend cut are subsiding. With today's nearly 22% surge in the stock, the yield has dropped to 8.6%.

Seagate's restructuring plan includes reducing the Company’s global headcount by approximately 6,500 employees, or 14% of its global headcount by the end of fiscal year 2017. The company said the restructuring should enable the Company to be operating within its targeted Non-GAAP product gross margin range of 27-32% by the December 2016 quarter.

Commenting on the news, Needham & Company analyst Richard Kugele said they believe this new version of STX should be able to generate FCF the $1.25-1.50B+ range, well in excess of the $750M of annual dividend expense required.

Meanwhile, Wells Fargo analyst Maynard Um said while lower, risk to a dividend cut is still present.

In response to a question on if the dividend will now be maintained, a company spokesperson told StreetInsider.com that they typically discuss that during their earnings call, which will be on August 2.

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