InterDigital (NASDAQ:IDCC) Will Pay A Dividend Of $0.35

The board of InterDigital, Inc. (NASDAQ:IDCC) has announced that it will pay a dividend of $0.35 per share on the 26th of October. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

Check out our latest analysis for InterDigital

InterDigital's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, InterDigital was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 20.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

InterDigital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from $0.40 total annually to $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. InterDigital's EPS has fallen by approximately 21% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On InterDigital's Dividend

Overall, a consistent dividend is a good thing, and we think that InterDigital has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for InterDigital that you should be aware of before investing. Is InterDigital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.