Here's What We Like About NXP Semiconductors' (NASDAQ:NXPI) Upcoming Dividend

Dec 30, 2023

Stock Analysis

NXP Semiconductors N.V. (NASDAQ:NXPI) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase NXP Semiconductors' shares before the 13th of June in order to receive the dividend, which the company will pay on the 6th of July.

The company's next dividend payment will be US$1.01 per share, on the back of last year when the company paid a total of US$4.06 to shareholders. Last year's total dividend payments show that NXP Semiconductors has a trailing yield of 2.2% on the current share price of $186.45. 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.

Check out our latest analysis for NXP Semiconductors

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see NXP Semiconductors paying out a modest 34% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see NXP Semiconductors's earnings per share have risen 10% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, NXP Semiconductors has increased its dividend at approximately 32% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

From a dividend perspective, should investors buy or avoid NXP Semiconductors? NXP Semiconductors 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. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 3 warning signs with NXP Semiconductors and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Find out whether NXP Semiconductors is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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NXP Semiconductors N.V. offers various semiconductor products.

Solid track record and fair value.