It looks like Skyworks Solutions, Inc. (NASDAQ:SWKS) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Skyworks Solutions' shares on or after the 20th of November, you won't be eligible to receive the dividend, when it is paid on the 12th of December.
The company's upcoming dividend is US$0.68 a share, following on from the last 12 months, when the company distributed a total of US$2.72 per share to shareholders. Based on the last year's worth of payments, Skyworks Solutions stock has a trailing yield of around 2.9% on the current share price of $92.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Skyworks Solutions
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Skyworks Solutions paying out a modest 41% of its earnings. A useful secondary check can be to evaluate whether Skyworks Solutions generated enough free cash flow to afford its dividend. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Skyworks Solutions earnings per share are up 4.0% per annum over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Skyworks Solutions has delivered an average of 22% per year annual increase in its dividend, based on the past nine years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Skyworks Solutions for the upcoming dividend? Earnings per share have been growing moderately, and Skyworks Solutions is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Skyworks Solutions is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Skyworks Solutions is facing. To help with this, we've discovered 1 warning sign for Skyworks Solutions that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.