IPG flexes balance-sheet muscles, gifts dividend to shareholders

Oxford, MA - Happy holidays, IPG Photonics (NASDAQ: IPGP) shareholders: the company has approved a $0.65/share one-time special cash dividend payable to stockholders as of Dec. 21, with payment on or about Dec. 28.

"Given our confidence in the company's long-term growth prospects, our strong balance sheet, and additional cash generated this year, the board decided to reward our shareholders," stated company chairman/CEO Valentin Gapontsev. (Another impetus, he pointed out, is the possibility of new tax increases on dividends.) IPG still has plenty of capital, he noted, to fund its growth strategy, including new products and M&A, he added.

Industry watchers, who quickly converted the per-share dividend to a rough total $33.9M in payments or about 10% of the company's current net cash balance, applauded the move. It's enough to please shareholders without dinging the company's balance sheet (which he sees actually improving to $356M in 4Q12) or impacting its long-term growth plans, notes Stifel Nicolaus analyst Patrick Newton. Olga Levinzon with Barclays similarly applauds the "positive surprise" as "a nice shareholder-friendly step and as a testament to the company's strong cash balance and expectations for further cash generation." Going forward, though, she expects IPG will tend to its knitting in expanding fiber laser applications and building up its laser systems business, and won't offer ongoing dividends.

Levinzon also reiterated concerns about the macro environment in 2013 with "likely muted overall laser demand." In its most recent quarter (3Q12), IPG cited strength in high-power lasers for automotive and general manufacturing applications, but acknowledged a bit of a slowdown in 4Q12. Industry sentiment about laser systems and equipment demand seems split between guarded optimism and expectations of flatness at best, though fiber lasers continue to be a bright spot. ILS will present its annual market review and forecast at the Laser Marketplace Seminar at Photonics West, and in our January-February issue.