Gilat Satellite Networks Ltd.: Up 62% in 2021 & Still Provides Safe 9.1% Dividend
Gilat Stock’s 2021 Outlook Remains Solid
Gilat Satellite Networks Ltd. (NASDAQ:GILT) is an overlooked tech stock with great long-term growth potential. The company provides satellite-based broadband communications.
GILT stock has been on a bit of a roller-coaster ride in the early part of 2021, but the second half of the year looks promising.
Gilat stock is up 62% since the start of the year, but it has slipped by about 50% from its February highs. While some of that fall can be blamed on first-quarter financial results that underwhelmed some investors, most of it’s a result of the big tumble that the broader tech sector experienced in February.
The fact is, Gilat Satellite Networks actually posted pretty solid sequential fourth-quarter results. The company’s revenue was down 45% year-over-year, but it was up roughly 15% sequentially, at $42.6 million. (Source: “Gilat Reports Fourth Quarter and Full Year 2020 Results,” Gilat Satellite Networks Ltd., February 16, 2021.)
Its fourth-quarter 2020 net income was $62.4 million ($1.12 per share), a 156% increase over the $24.0 million ($0.43 per share) in the same prior-year period. Most of that income can be attributed to one-time events. In the third quarter of 2020, the company reported a net loss of $11.6 million ($0.21 loss per share).
The company’s fourth-quarter 2020 adjusted net loss came in at $1.9 million ($0.03 loss per share), compared to fourth-quarter 2019 net income of $9.1 million ($0.16 per share). In the third quarter of 2020, Gilat Satellite Networks reported a net loss of $2.6 million ($0.05 loss per share).
Looking ahead, management noted that the company closed some serious deals during the second half of 2020, including one with the U.S. government and the U.S. Department of Defense. And that momentum has carried into 2021.
In March, Gilat Satellite Networks announced that it was selected by satellite services company Telespazio S.p.A. to supply enterprise connectivity in Brazil to a multinational energy company. Gilat will provide the satellite network and thousands of small satellite ground stations to Brazil’s largest private-sector energy company. (Source: “Telespazio Selects Gilat to Supply Enterprise Connectivity in Brazil for a Multinational Leading Energy Company,” Gilat Satellite Networks Ltd., March 10, 2021.)
Also in March, Gilat Satellite Networks announced that SES S.A., a leader in global content connectivity solutions, selected Gilat to enable a tier-1 4G/LGE mobile network operator in Brazil to provide broadband connectivity for education. (Source: “SES Selected Gilat to Enable Tier-1 4G/LTE MNO in Brazil to Provide Broadband Connectivity for Education,” Gilat Satellite Networks Ltd., March 22, 2021.)
These recent deals, coupled with the ones announced in the second half of 2020, position GILT stock well.
While the pandemic could still negatively impact Gilat Satellite Networks in 2021, because of the company’s strong bookings, management believes its 2021 operating results will be materially better than those of 2020.
That positions Gilat stock for solid growth over the next few quarters.
Chart courtesy of StockCharts.com
That said, Gilat Satellite Networks is still able to provide investors with a strong dividend. Last December, the company announced that its board of directors declared a cash dividend of $0.63 per share, to be paid on January 20, 2021. (Source: “Gilat Declares $35 Million Cash Dividend to Shareholders,” Gilat Satellite Networks Ltd., December 30, 2020.)
Along with the $20.0-million distribution at the beginning of December, the aggregate amount payable to shareholders was $55.0 million, or $0.99 per share. At the current share price, that represents an annual dividend of 9.1%.
And the dividend is safe; the payout ratio is just 57.1%.
The Lowdown on Gilat Satellite Networks Ltd.
A global leader in satellite networking technology, Gilat Satellite Networks Ltd. is a financially robust company that closed on a raft of significant deals in the second half of 2020.
While the company’s fourth-quarter results were underwhelming, these deals (and subsequent ones) have positioned Gilat for serious financial growth in 2021. In the meantime, investors can take solace in GILT stock’s 9.1% dividend.