What To Know Before Buying Cabot Microelectronics Corporation (NASDAQ:CCMP) For Its Dividend
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Cabot Microelectronics Corporation (NASDAQ:CCMP) has recently paid dividends to shareholders, and currently yields 1.7%. Should it have a place in your portfolio? Let’s take a look at Cabot Microelectronics in more detail.
See our latest analysis for Cabot Microelectronics
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Will it have the ability to keep paying its dividends going forward?
How does Cabot Microelectronics fare?
The company currently pays out 33% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 20% which, assuming the share price stays the same, leads to a dividend yield of 1.9%. However, EPS should increase to $6.57, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Cabot Microelectronics as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Cabot Microelectronics generates a yield of 1.7%, which is on the low-side for Semiconductor stocks.
Next Steps:
Taking all the above into account, Cabot Microelectronics is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for CCMP’s future growth? Take a look at our free research report of analyst consensus for CCMP’s outlook.
Valuation: What is CCMP 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 CCMP 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.
