KLA's (NASDAQ:KLAC) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
August 10, 2021
NasdaqGS:KLAC
Source: Shutterstock

KLA Corporation's (NASDAQ:KLAC) dividend will be increasing to US$1.05 on 1st of September. The announced payment will take the dividend yield to 1.1%, which is in line with the average for the industry.

See our latest analysis for KLA

KLA's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, KLA was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 35.5% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:KLAC Historic Dividend August 11th 2021

KLA Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from US$1.00 to US$4.20. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see KLA has been growing its earnings per share at 24% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like KLA's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for KLA that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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