NXP Semiconductors N.V. (NASDAQ:NXPI) will pay a dividend of $1.01 on the 9th of July. The dividend yield will be 1.9% based on this payment which is still above the industry average.
If the payments aren’t sustainable, a high yield for a few years won’t matter that much. Based on the last payment, NXP Semiconductors was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 53.2%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for NXP Semiconductors
It is great to see that NXP Semiconductors has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $1.00 in 2018 to the most recent total annual payment of $4.06. This means that it has been growing its distributions at 22% per annum over that time. NXP Semiconductors has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The company’s investors will be pleased to have been receiving dividend income for some time. NXP Semiconductors has seen EPS rising for the last five years, at 61% per annum. The company’s earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that NXP Semiconductors could prove to be a strong dividend payer.
Overall, we like to see the dividend staying consistent, and we think NXP Semiconductors might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 NXP Semiconductors that investors should know about before committing capital to this stock. 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.
