Yahoo Finanza Why It Might Not Make Sense To Buy Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) For Its Upcoming Dividend
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) stock is about to trade ex-dividend in four days. You can purchase shares before the 24th of September in order to receive the dividend, which the company will pay on the 13th of October.
Kulicke and Soffa Industries's upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Last year's total dividend payments show that Kulicke and Soffa Industries has a trailing yield of 2.1% on the current share price of $23.18. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Kulicke and Soffa Industries
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Kulicke and Soffa Industries paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (86%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Kulicke and Soffa Industries's earnings per share have been shrinking at 3.8% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kulicke and Soffa Industries's dividend payments are effectively flat on where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
To Sum It Up
From a dividend perspective, should investors buy or avoid Kulicke and Soffa Industries? While earnings per share are shrinking, it's encouraging to see that at least Kulicke and Soffa Industries's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Although, if you're still interested in Kulicke and Soffa Industries and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 2 warning signs for Kulicke and Soffa Industries that you should be aware of before investing in their shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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