A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, MKS Instruments Inc (NASDAQ:MKSI) has paid dividends to shareholders, and these days it yields 1.1%. Let’s dig deeper into whether MKS Instruments should have a place in your portfolio.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- 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 it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does MKS Instruments fit our criteria?
The current trailing twelve-month payout ratio for the stock is 10%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 9.5%, leading to a dividend yield of around 1.1%. Furthermore, EPS is forecasted to fall to $7.3 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view MKS Instruments as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, MKS Instruments has a yield of 1.1%, which is on the low-side for Semiconductor stocks.
Now you know to keep in mind the reason why investors should be careful investing in MKS Instruments for the dividend. 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MKSI’s future growth? Take a look at our free research report of analyst consensus for MKSI’s outlook.
- Valuation: What is MKSI 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 MKSI 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 firstname.lastname@example.org.