QUALCOMM's (NASDAQ:QCOM) Shareholders Will Receive A Bigger Dividend Than Last Year

By
Simply Wall St
Published
May 28, 2021
NasdaqGS:QCOM
Source: Shutterstock

QUALCOMM Incorporated (NASDAQ:QCOM) has announced that it will be increasing its dividend on the 24th of June to US$0.68. This makes the dividend yield 2.0%, which is above the industry average.

Check out our latest analysis for QUALCOMM

QUALCOMM's 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, QUALCOMM was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 0.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
NasdaqGS:QCOM Historic Dividend May 29th 2021

QUALCOMM Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.76 in 2011, and the most recent fiscal year payment was US$2.72. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. QUALCOMM has seen EPS rising for the last five years, at 17% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like QUALCOMM'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. 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 of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 QUALCOMM that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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