Universal Display (NASDAQ:OLED) Will Pay A Larger Dividend Than Last Year At $0.40
Universal Display Corporation (NASDAQ:OLED) will increase its dividend from last year's comparable payment on the 29th of March to $0.40. This makes the dividend yield about the same as the industry average at 0.9%.
View our latest analysis for Universal Display
Universal Display's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Universal Display was paying only paying out a fraction of earnings, but the payment was a massive 267% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 49.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.
Universal Display Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the dividend has gone from $0.12 total annually to $1.60. This implies that the company grew its distributions at a yearly rate of about 45% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Universal Display has seen EPS rising for the last five years, at 28% 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.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Universal Display is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Universal Display that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
