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Is It Smart To Buy KLA Corporation (NASDAQ:KLAC) Before It Goes Ex-Dividend?

Simply Wall St

It looks like KLA Corporation (NASDAQ:KLAC) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 14th of August in order to be eligible for this dividend, which will be paid on the 1st of September.

KLA's upcoming dividend is US$0.90 a share, following on from the last 12 months, when the company distributed a total of US$3.60 per share to shareholders. Looking at the last 12 months of distributions, KLA has a trailing yield of approximately 1.8% on its current stock price of $202.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether KLA has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for KLA

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. KLA paid out a comfortable 43% of its profit last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see KLA's earnings have been skyrocketing, up 28% per annum for the past five years. KLA is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. KLA has delivered 20% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy KLA for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, KLA appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks KLA is facing. Case in point: We've spotted 2 warning signs for KLA you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.