Here's What We Like About Amkor Technology's (NASDAQ:AMKR) Upcoming Dividend
It looks like Amkor Technology, Inc. (NASDAQ:AMKR) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Amkor Technology investors that purchase the stock on or after the 11th of March will not receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be US$0.07875 per share. Last year, in total, the company distributed US$0.32 to shareholders. Last year's total dividend payments show that Amkor Technology has a trailing yield of 0.9% on the current share price of US$35.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Amkor Technology
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Amkor Technology is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 14% of its free cash flow in the last year.
It's positive to see that Amkor Technology's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Amkor Technology's earnings have been skyrocketing, up 22% per annum for the past five years. Amkor Technology looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Amkor Technology has increased its dividend at approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Amkor Technology an attractive dividend stock, or better left on the shelf? Amkor Technology has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Amkor Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Amkor Technology for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Amkor Technology you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
