NXP Semiconductors (NASDAQ:NXPI) Is Paying Out A Dividend Of $1.01

NXP Semiconductors N.V.'s (NASDAQ:NXPI) investors are due to receive a payment of $1.01 per share on 10th of April. This means the annual payment is 1.6% of the current stock price, which is above the average for the industry.

View our latest analysis for NXP Semiconductors

NXP Semiconductors' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, NXP Semiconductors' 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.

The next year is set to see EPS grow by 33.7%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

NXP Semiconductors Doesn't Have A Long Payment History

It is great to see that NXP Semiconductors has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. 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 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.

We Could See NXP Semiconductors' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. NXP Semiconductors has impressed us by growing EPS at 10.0% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like NXP Semiconductors' Dividend

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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for NXP Semiconductors that investors need to be conscious of moving forward. 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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