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Corning: When Investors Ignore Dividend Increases

NEW YORK ( TheStreet) -- A curious thing happened with Corning (GLW - Get Report) last week. The company raised its quarterly dividend 20% to 9 cents a share, but the market yawned, and shares are now down about 2% since the announcement.

Somewhat quietly, Corning has nearly doubled its dividend in the past two years. The indicated yield, now at 2.7%, is very respectable, yet the company itself is not garnering much respect from the markets.

There's little doubt that the challenging global economic environment has hurt; it's part of the reason that Corning shares are trading at about the same price they did three and a half years ago.

While revenue rose 33% between 2008 and 2011, earnings have been a bit choppy, and net margins have fallen. Yet last quarter's net profit margin was still 24.2%. Although that was down from 37.7% for the same quarter last year, it's still impressive, especially for a company trading with a trailing P/E ratio of 9.

The rising dividend, to me at least, suggests management's confidence is growing. As I've said before in previous columns, you can't fake dividend increases.

The company also has been buying back stock; shares outstanding have been reduced by 63 million shares in the past year. Although buybacks remain somewhat controversial in the investment community, I like them when they're in combination with a growing dividend.

Corning certainly has the resources for both buybacks and future dividend increases. The company ended the last quarter with $6.34 billion, or $4.21 a share, in cash and short-term investments.

Dripping with liquidity, the company has a current ratio of 5, and that measure is not impacted all that much by inventory; the quick ratio is 4.4.

Although debt stood at about $3.3 billion at the end of the quarter, the long-term debt-to-equity ratio is just 15%. Corning is also trading below tangible book value per share.

Given all of these measures, expectations are low for this company. Any hint of an economic recovery should fuel the stock's recovery, but therein lies the major issue. When will we see signs a real economic recovery? GLW Chart GLW data by YCharts

Certainly, Corning is not the only electronics or technology-related company that is trading at relatively cheap valuations. Look at Dell (DELL), which is trading with a P/E of less than 6.

Dell ended the last quarter with $11.9 billion, or $6.81 per share, in cash and short-term investments, while debt stood at about $8.4 billion. That puts the long-term debt-to-equity ratio at about 60%, which is a concern. DELL Chart DELL data by YCharts
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