Yahoo Finance Microchip Technology's (NASDAQ:MCHP) Shareholders Will Receive A Bigger Dividend Than Last Year
Microchip Technology Incorporated (NASDAQ:MCHP) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of June to $0.452. This will take the dividend yield to an attractive 2.0%, providing a nice boost to shareholder returns.
View our latest analysis for Microchip Technology
Microchip Technology's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Microchip Technology 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 3.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.
Microchip Technology Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.708 in 2014 to the most recent total annual payment of $1.81. This means that it has been growing its distributions at 9.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Microchip Technology has impressed us by growing EPS at 36% per year over the past five years. 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 Microchip Technology could prove to be a strong dividend payer.
Microchip Technology Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Microchip Technology is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Microchip Technology 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.
