NXP Semiconductors (NASDAQ:NXPI) Has Announced A Dividend Of $1.01

NXP Semiconductors N.V. (NASDAQ:NXPI) has announced that it will pay a dividend of $1.01 per share on the 9th of October. This makes the dividend yield 1.6%, which will augment investor returns quite nicely.

Check out our latest analysis for NXP Semiconductors

NXP Semiconductors' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, NXP Semiconductors was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 46.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

NXP Semiconductors Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the dividend has gone from $1.00 total annually to $4.06. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. NXP Semiconductors has impressed us by growing EPS at 8.8% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for NXP Semiconductors' prospects of growing its dividend payments in the future.

NXP Semiconductors Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for NXP Semiconductors that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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