Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

April 13, 2011 - Garmin Ltd. (GRMN-NASDAQ) operates as a holding company and through its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS) enabled products and other navigation, communication, and information products worldwide. It has four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation.

The Marine segment offers network products and multifunction displays, fixed-mount GPS/chartplotter products, instruments, radars, autopilots, and sounder products. The Aviation segment provides panel-mounted product line, which includes GPS-enabled navigation, VHF communications transmitters/receivers, multi function displays, electronic flight instrumentation systems, traffic advisory systems and traffic collision avoidance systems, instrument landing system receivers, surveillance products, marker beacon receivers, and audio panels.

Garmin's non-aviation products and consumer products are sold through independent dealers and distributors, and panel-mount aviation products are sold through aviation distributors. It has a strategic alliance with ASUSTeK Computer Inc. to design, manufacture, and distribute co-branded location-centric mobile phones; and with AB Volvo Penta to create marine instrumentation, navigation, and communication equipment. The company was founded in 2000 and is based in Camana Bay, Cayman Islands.

Two things stand out right away: the company has almost $1.3 billion in cash, and management has announced it intends to pay a $2.00 dividend this year. If that proves correct, the yield will be 5.9%. One other aspect of the dividend: it's paid once a year. Last year is was in April and $1.50. Two years ago it was 75 cents and paid in December. The same was true in 2007 and 2008. Exactly when the new dividend will be paid is not yet known, but it is typically paid in mid December.

Sales have been declining for several years, going from $3.49 billion in 2008 to $2.689 billion last year. This year, 18 analysts have a consensus estimate of $2.46 billion, then see $2.36 billion next year.

Earnings fared a little better with $3.48 in 2008, then $3.50 in 2009. But last year, they hit the wall and dropped to $2.36. This year, consensus estimate is for $2.35, then $2.31 for 2012. Not exactly a growth story. But there is more to the story.

That cash is part of it. With a cash position that could pay a dividend of over $6 a share, paying the $2.00 this year won't be a stretch. Furthermore, there is no debt here so no interest payments will syphon money away from the dividend. Of course, how long management will continue to give a payout that is almost as much as earnings is the big question. It's obvious they can pay it for several more years, if they wanted, but Research and Development funding has to be high on the priority list. The company has also announced it will buy back $300 million in stock with part of its cash.

Management is turning its focus to its three other divisions for growth: Marine, Outdoor/Fitness, and Aviation. The company recently signed new deals with OEMs (original equipment manufacturers) in the Marine division. With healthier lifestyles becoming more of a focus for many, the company is allocating more funds to Outdoor/Fitness to capitalize on the trend. In its fourth division, Automotive, sales are waning. Though it's still the largest contributor (62% in 2010), that was down from 70% in 2009.

Essential numbers: Market Cap is $6.55 billion. Trailing P/E is 11.43 and Forward P/E is 14.60. Price to sales is 2.44. Price to Book is 2.15. Book value is $15.69. Operating margin for the last 12 months was 23.67%. Profit margin was 21.73%. Return on equity was 19.86% and Return on assets was 10.18%. Total cash per share is $6.61. Current ratio is 3.74. Total Cash is $1.29 billion. Beta is 1.4. The stock is down 7.23% in the last year. There are 194.36 million sharest Outstanding with a Float of 113.39. Insiders own 23% of the stock and Institutions have 38.10% of the Float.

There isn't much of a story for capital gains here. Earnings don't look to be improving for at least 2 years or more. And that will depend on new products and services. But for Income investors, the dividend here is tempting. The company will definitely pay it this year and most likely next. But after that, it's a big question.