Microchip Technology's (NASDAQ:MCHP) Dividend Will Be Increased To $0.328
Microchip Technology Incorporated (NASDAQ:MCHP) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of December to $0.328. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.
Check out our latest analysis for Microchip Technology
Microchip Technology's Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Microchip Technology's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 33.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.
Microchip Technology Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.698 in 2012 to the most recent total annual payment of $1.31. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Microchip Technology has seen EPS rising for the last five years, at 20% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Microchip Technology Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Microchip Technology that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
