Here's What We Like About Kulicke and Soffa Industries' (NASDAQ:KLIC) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Kulicke and Soffa Industries' shares before the 22nd of March to receive the dividend, which will be paid on the 10th of April.

The company's next dividend payment will be US$0.19 per share, and in the last 12 months, the company paid a total of US$0.76 per share. Last year's total dividend payments show that Kulicke and Soffa Industries has a trailing yield of 1.4% on the current share price of $53.69. If you buy this business for its dividend, you should have an idea of whether Kulicke and Soffa Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Kulicke and Soffa Industries

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. Kulicke and Soffa Industries has a low and conservative payout ratio of just 13% of its income after tax. A useful secondary check can be to evaluate whether Kulicke and Soffa Industries generated enough free cash flow to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Kulicke and Soffa Industries has grown its earnings rapidly, up 26% a year for the past five years. Kulicke and Soffa Industries earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, five years ago, Kulicke and Soffa Industries has lifted its dividend by approximately 9.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Kulicke and Soffa Industries an attractive dividend stock, or better left on the shelf? We love that Kulicke and Soffa Industries is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Kulicke and Soffa Industries for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Kulicke and Soffa Industries you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

What are the risks and opportunities for Kulicke and Soffa Industries?

NasdaqGS:KLIC

Kulicke and Soffa Industries

Kulicke and Soffa Industries, Inc. designs, manufactures, and sells capital equipment and tools used to assemble semiconductor devices.Show more

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Rewards

• Trading at 52% below our estimate of its fair value

Risks

• Earnings are forecast to decline by an average of 4.3% per year for the next 3 years

• Significant insider selling over the past 3 months

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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.