Microchip Technology (NASDAQ:MCHP) Is Increasing Its Dividend To $0.383

Dec 23, 2023

Stock Analysis

Microchip Technology Incorporated (NASDAQ:MCHP) will increase its dividend from last year's comparable payment on the 5th of June to $0.383. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.

View our latest analysis for Microchip Technology

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Microchip Technology's earnings easily 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 rise by 17.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.702 in 2013 to the most recent total annual payment of $1.53. This means that it has been growing its distributions at 8.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Microchip Technology has been growing its earnings per share at 49% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Microchip Technology that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Find out whether Microchip Technology 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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Microchip Technology Incorporated develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia.

Outstanding track record established dividend payer.