STMicroelectronics (EPA:STMPA) Has Affirmed Its Dividend Of $0.09

STMicroelectronics N.V. (EPA:STMPA) has announced that it will pay a dividend of $0.09 per share on the 25th of June. This payment means that the dividend yield will be 1.4%, which is around the industry average.

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STMicroelectronics' Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, STMicroelectronics' dividend was only 29% of earnings, however it was paying out 465% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 86.9%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for STMicroelectronics

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $0.40 total annually to $0.36. Doing the maths, this is a decline of about 1.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, STMicroelectronics' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, STMicroelectronics could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On STMicroelectronics' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about STMicroelectronics' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think STMicroelectronics is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for STMicroelectronics that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.