MKS Instruments (NASDAQ:MKSI) Is Paying Out A Dividend Of $0.22
The board of MKS Instruments, Inc. (NASDAQ:MKSI) has announced that it will pay a dividend on the 10th of March, with investors receiving $0.22 per share. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.
See our latest analysis for MKS Instruments
MKS Instruments' Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, MKS Instruments' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 25.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 19%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
MKS Instruments Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.60 in 2013, and the most recent fiscal year payment was $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 3.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, MKS Instruments has the option to increase the payout ratio to return more cash to shareholders.
An additional note is that the company has been raising capital by issuing stock equal to 20% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like MKS Instruments' Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for MKS Instruments (of which 2 are a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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