Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) will increase its dividend on the 9th of January to $0.19, which is 12% higher than last year's payment from the same period of $0.17. This makes the dividend yield about the same as the industry average at 1.4%.
Kulicke and Soffa Industries' Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Kulicke and Soffa Industries was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 53.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 23%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Kulicke and Soffa Industries Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.48 in 2018 to the most recent total annual payment of $0.68. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. Kulicke and Soffa Industries has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Kulicke and Soffa Industries has impressed us by growing EPS at 34% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Kulicke and Soffa Industries' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Kulicke and Soffa Industries (1 is a bit unpleasant!) that you should be aware of before investing. 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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