It looks like Maxim Integrated Products, Inc. (NASDAQ:MXIM) is about to go ex-dividend in the next 4 days. You can purchase shares before the 26th of November in order to receive the dividend, which the company will pay on the 13th of December.
Maxim Integrated Products’s next dividend payment will be US$0.48 per share, on the back of last year when the company paid a total of US$1.92 to shareholders. Looking at the last 12 months of distributions, Maxim Integrated Products has a trailing yield of approximately 3.5% on its current stock price of $55.47. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Maxim Integrated Products is paying out an acceptable 67% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Maxim Integrated Products generated enough free cash flow to afford its dividend. Dividends consumed 70% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see Maxim Integrated Products’s earnings per share have risen 18% per annum over the last five years. Maxim Integrated Products has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last ten years, Maxim Integrated Products has lifted its dividend by approximately 9.1% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has Maxim Integrated Products got what it takes to maintain its dividend payments? It’s good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That’s why we’re glad to see Maxim Integrated Products’s earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow – 67% and 70% respectively. To summarise, Maxim Integrated Products looks okay on this analysis, although it doesn’t appear a stand-out opportunity.
Curious what other investors think of Maxim Integrated Products? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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