Is ASM International NV (AMS:ASM) A Smart Pick For Income Investors?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, ASM International NV (AMS:ASM) has paid dividends to shareholders, and these days it yields 1.8%. Should it have a place in your portfolio? Let’s take a look at ASM International in more detail.
View our latest analysis for ASM International
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How well does ASM International fit our criteria?
The current trailing twelve-month payout ratio for the stock is 14%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 23%, leading to a dividend yield of 2.1%. However, EPS is forecasted to fall to €3.4 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, ASM International generates a yield of 1.8%, which is on the low-side for Semiconductor stocks.
Next Steps:
If ASM International is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for ASM’s future growth? Take a look at our free research report of analyst consensus for ASM’s outlook.
Valuation: What is ASM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ASM is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
