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Johnson Controls Inc (JCI), Delphi Automotive PLC (DLPH): An Auto Recovery Is Good for These Auto Parts Suppliers

Can’t beat the sound with this company

Harman International Industries Inc./DE/ (NYSE:HAR) sound systems are in more than 80% of the world’s luxury cars. Its brands include AKG, Harman Kardon, JBL, Infinity, Lexicon and Mark Levinson. The company also makes audio equipment used in recording studios and cinemas.

In the most recent quarter, earnings improved from $0.59 per share in the prior quarter to $0.79 per share. For fiscal 2013, earnings are now projected to be $3 per share compared to prior guidance of $2.70 to $2.90 per share. Revenues, however, decreased by 3.1% due to the slowdown in Europe and a 12% drop in European auto production.

Going forward, Harman International Industries Inc./DE/ (NYSE:HAR) continues to be a very shareholder-friendly company. The company increased the share repurchase authorization by $200 million. This is in addition to the $70 million left on its previous buyback. Harman also announced that it was doubling the quarterly dividend from $0.15 per share to $0.30. The dividend yield is now 2.3% and that makes the stock attractive for income investors. Harman International Industries Inc./DE/ (NYSE:HAR) can afford these moves with over $434 million in cash on the balance sheet and only $294 million in debt. The dividend payout ratio is still only 40%.

Growth is also likely to come from the company’s continued innovations. So far this fiscal year, Harman has filed 300 new patents and now has more than 4,600 patents in its portfolio. At the Geneva Auto Show, Harman and Ferrari showcased the use of Apple Inc. (NASDAQ:AAPL)’s Siri technology. Partnering with Apple is a great move for Harman and illustrates its strong presence in the audio space.

Foolish assessment

My favorite company in the space is Harman International. For one, I love their products. Two, I like the moves it is making in returning cash to shareholders and I think it’s positioned to grow as the top choice in the auto luxury market.

My second choice would be Johnson Controls Inc (NYSE:JCI). The stock has risen 35% in the past year and has a history of increasing the dividend. The capital expenditures Johnson Controls has made over the past two years should start to pay off for the company starting this year. Lastly, Delphi Automotive PLC (NYSE:DLPH) is a great company, but I would hold off on purchasing shares as they have doubled in the past year.

The article An Auto Recovery Is Good for These Auto Parts Suppliers originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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