Skyworks Solutions (NASDAQ:SWKS) Is Paying Out A Larger Dividend Than Last Year

Skyworks Solutions, Inc. (NASDAQ:SWKS) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of September to $0.62. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

See our latest analysis for Skyworks Solutions

Skyworks Solutions' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Skyworks Solutions was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 44.1%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Skyworks Solutions Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 8 years was $0.44 in 2014, and the most recent fiscal year payment was $2.48. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Skyworks Solutions Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Skyworks Solutions has grown earnings per share at 8.9% per year over the past five years. 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.

Skyworks Solutions Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Skyworks Solutions that investors need to be conscious of moving forward. Is Skyworks Solutions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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