Important news for shareholders and potential investors in Silicon Motion Technology Corporation (NASDAQ:SIMO): The dividend payment of US$0.30 per share will be distributed into shareholder on 22 August 2018, and the stock will begin trading ex-dividend at an earlier date, 08 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Silicon Motion Technology’s latest financial data to analyse its dividend attributes.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Silicon Motion Technology fare?
The company currently pays out 48.62% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect SIMO’s payout to fall to 33.32% of its earnings, which leads to a dividend yield of 2.36%. However, EPS should increase to $3.17, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Silicon Motion Technology as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Silicon Motion Technology has a yield of 2.21%, which is high for Semiconductor stocks but still below the market’s top dividend payers.
If Silicon Motion Technology is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SIMO’s future growth? Take a look at our free research report of analyst consensus for SIMO’s outlook.
- Valuation: What is SIMO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SIMO is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.