InterDigital's (NASDAQ:IDCC) Dividend Will Be $0.35

InterDigital, Inc. (NASDAQ:IDCC) will pay a dividend of $0.35 on the 26th of July. This means the annual payment is 1.5% of the current stock price, which is above the average for the industry.

View our latest analysis for InterDigital

InterDigital's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, InterDigital's earnings easily 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 fall by 25.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

InterDigital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.40, compared to the most recent full-year payment of $1.40. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

InterDigital Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. InterDigital has seen EPS rising for the last five years, at 6.6% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

InterDigital Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for InterDigital (1 is a bit concerning!) 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 yield dividend stocks.

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

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.