Garrett Corp. has been going through a difficult financial period. Over the past
ID: 2672835 • Letter: G
Question
Garrett Corp. has been going through a difficult financial period. Over the past 3 years, it's stock price has dropped from $50 to $18 per share. Throughout the downturn, Garrett has managed to pay a $1 dividend every year. Management feels the worst is over but intends to maintain the $1 dividend for 3 more years, after which they plan to increase it by 6% per year, indefinitely. Comparable stocks are returning 11%.
a. If these projections are accurate, is Garrett stock a good buy at $18?
b. How do you think the market feels about Garrett's management?
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