Applied Materials (NASDAQ:AMAT) Will Pay A Larger Dividend Than Last Year At $0.40

Applied Materials, Inc. (NASDAQ:AMAT) will increase its dividend from last year's comparable payment on the 13th of June to $0.40. This takes the annual payment to 0.8% of the current stock price, which is about average for the industry.

View our latest analysis for Applied Materials

Applied Materials' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Applied Materials' dividend was comfortably covered by both cash flow and earnings. 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 24.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Applied Materials Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.40, compared to the most recent full-year payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Applied Materials has been growing its earnings per share at 18% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Applied Materials' prospects of growing its dividend payments in the future.

Applied Materials Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Applied Materials is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Applied Materials that you should be aware of before investing. Is Applied Materials not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.