Silicon Motion Technology (NASDAQ:SIMO) Has Affirmed Its Dividend Of US$0.35

Silicon Motion Technology Corporation (NASDAQ:SIMO) has announced that it will pay a dividend of US$0.35 per share on the 19th of August. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Silicon Motion Technology

Silicon Motion Technology's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Silicon Motion Technology's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 83.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Silicon Motion Technology Is Still Building Its Track Record

Silicon Motion Technology's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 9 years was US$0.60 in 2012, and the most recent fiscal year payment was US$1.40. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Silicon Motion Technology to be a consistent dividend paying stock.

We Could See Silicon Motion Technology's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Silicon Motion Technology has seen EPS rising for the last five years, at 5.3% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Silicon Motion Technology's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Silicon Motion Technology 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 performing dividend stock.

If you decide to trade Silicon Motion Technology, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.