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

NXP Semiconductors N.V. (NASDAQ:NXPI) will pay a dividend of $1.01 on the 9th of July. Based on this payment, the dividend yield on the company's stock will be 1.9%, which is an attractive boost to shareholder returns.

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NXP Semiconductors' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, NXP Semiconductors' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 53.2%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for NXP Semiconductors

NXP Semiconductors Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was $1.00, compared to the most recent full-year payment of $4.06. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. NXP Semiconductors has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that NXP Semiconductors has grown earnings per share at 61% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that NXP Semiconductors could prove to be a strong dividend payer.

NXP Semiconductors Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for NXP Semiconductors that investors need to be conscious of moving forward. 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.