Microchip Technology (NASDAQ:MCHP) Is Increasing Its Dividend To $0.454
editorial-team@simplywallst.com (Simply Wall St)
Tue, Aug 6, 2024, 5:29 AM PDT2 min read
In this article:
Microchip Technology Incorporated ( NASDAQ:MCHP) will increase its dividend from last year's comparable payment on the 5th of September to $0.454. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Microchip Technology
Microchip Technology's Payment Has Solid Earnings CoverageA big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Microchip Technology's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
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Over the next year, EPS is forecast to expand by 46.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.
historic-dividend
Microchip Technology Has A Solid Track RecordEven over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.709 in 2014 to the most recent total annual payment of $1.82. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year 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 GrowInvestors who have held shares in the company for the past few years will be happy with the dividend income they have received. Microchip Technology has seen EPS rising for the last five years, at 27% per annum. Microchip Technology is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
We Really Like Microchip Technology's DividendIn summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
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Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Microchip Technology 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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