There's A Lot To Like About Kulicke and Soffa Industries' (NASDAQ:KLIC) Upcoming US$0.14 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Kulicke and Soffa Industries' shares before the 22nd of September to receive the dividend, which will be paid on the 12th of October.

The company's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.56 per share. Last year's total dividend payments show that Kulicke and Soffa Industries has a trailing yield of 0.8% on the current share price of $67.58. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Kulicke and Soffa Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kulicke and Soffa Industries paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Kulicke and Soffa Industries generated enough free cash flow to afford its dividend. Luckily it paid out just 17% of its free cash flow last year.

It's positive to see that Kulicke and Soffa Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Kulicke and Soffa Industries's earnings have been skyrocketing, up 42% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Kulicke and Soffa Industries looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kulicke and Soffa Industries has delivered 5.3% dividend growth per year on average over the past three years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Kulicke and Soffa Industries an attractive dividend stock, or better left on the shelf? Kulicke and Soffa Industries has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Kulicke and Soffa Industries, and we would prioritise taking a closer look at it.

In light of that, while Kulicke and Soffa Industries has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Kulicke and Soffa Industries has 3 warning signs (and 2 which are potentially serious) we think you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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