Following an overall mixed reception of its latest earnings report following the midweek session, Salesforce (NYSE:CRM) saw its shares rise moderately on Thursday. Buoying sentiment was the company’s announcement of its first-ever dividend. The move might be a necessary one as its top-line expansion decelerates.
After Wednesday’s closing bell, Salesforce — a cloud-based specialist focusing on customer relationship management software — stated that during its fiscal fourth quarter (ended Jan. 31), the company reported revenue of $9.29 billion. This figure beat Wall Street’s consensus target of $9.22 billion. It also represented an 11% lift from the year-ago quarter.
Regarding profitability, on an adjusted basis, the software firm posted earnings per share of $2.29. This tally beat the consensus expectation of $2.27. One year prior, Salesforce posted an EPS of $1.68.
However, investors weren’t pleased with management’s guidance for the full fiscal year of 2025. Per Salesforce, it expects revenue in a range of $37.7 billion to $38 billion, translating to growth of 9%. However, analysts targeted sales of $38.57 billion or 11% growth.
Still, the saving grace for CRM stock was the announcement of its first quarterly dividend of 40 cents a share. Per Bloomberg, the dividend will be payable on April 11 to shareholders as of March 14.
Passive Income Could Actively Attract Buyers to CRM Stock
Although one of the most prominent names in customer-relations-focused software, Salesforce struggled badly between late 2021 and late 2022. Soaring inflation following the Federal Reserve raising interest rates crimped demand for enterprise software. Further, as Investor’s Business Daily pointed out, activist investors in 2023 pressured management to improve margins through cutting costs.
Indeed, the continued growth in per-share profitability helped mitigate the sour taste of the aforementioned revenue guidance. In addition, the deployment of dividends to attract new investors to CRM stock may be a necessary move.
For example, Salesforce, for the first time, provided guidance for subscription and support revenue. This look essentially strips out its professional services business. Management expects 10% growth for the former category while the latter remains under pressure. Per Barron’s, this includes an 8% decline in the January quarter.
Against a broader view, revenue growth is declining. For fiscal year 2024, the company posted revenue of $34.86 billion, up 11% from the prior year’s result. However, between fiscal years 2022 and 2023, sales growth clocked in at 18.3%. In other words, CRM stock is seeing its growth machine fade, making the inclusion of a dividend much more attractive.
Why It Matters
Presently, analysts rate CRM stock as a consensus moderate buy. This assessment breaks down as 28 buys, 10 holds and one sell. Overall, the experts anticipate that CRM will hit $324.53 per share. The most optimistic target calls for a price of $380.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
