While the semiconductor industry has been viewed primarily as a growth sector, in recent years several industry players have emerged as appealing income plays for yield-seeking dividend investors.
In this article, I tried to determine which of the eight best dividend yielding semiconductor stocks, traded in the U.S., is the most attractive for dividend-seeking investors.
I consider that besides dividend yield, the consistency and the rate of raising dividend payments are the most important factors for dividend-seeking investors. Investing in companies that regularly raise dividends provides security in an uncertain market and means higher returns ahead. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time. Of course, it is also essential that a company has enough earnings growth prospects to maintain increasing dividend payments.
The eight stocks are: Analog Devices, Inc. (ADI), Brooks Automation, Inc. (BRKS), Cypress Semiconductor Corporation (CY), Intel Corporation (INTC), Intersil Corporation (ISIL), Microchip Technology Inc. (MCHP), Maxim Integrated Products, Inc. (MXIM) and STMicroelectronics NV (STM). All the data for this article were taken from Yahoo Finance and finviz.com on March 10.
The table below presents the eight best dividend yielding semiconductor companies, their last price, their market cap, the forward annual dividend rate, the forward yield, the payout ratio and the average annual dividend rate of growth for the past five years. Since CY, ISIL and STM suffered a loss in the trailing twelve months, payout ratio could not be calculated for these stocks.
The charts below present the dividend yield and the average annual dividend rate of growth for the past five and ten years, for the best yielding semiconductor companies. Since BRKS started to pay dividends in September 2011, and CY started to pay regular dividends in June 2011, dividend rate of growth could not be calculated for these stocks.
The charts above emphasize the consistency of raising dividend payments during the last five and ten years. The charts clearly show that ADI and INTC have raised their payouts at a much higher rate than the other best yielding semiconductor companies in the last five years.
CY Dividend data by YCharts
ISIL Dividend data by YCharts
ADI Dividend Yield data by YCharts
ISIL Dividend Yield data by YCharts
The charts below present the forward P/E, the average annual earnings growth estimates for the next 5 years, the price-to-sales ratio and the price to book value of the eight companies.
Among the eight best-yielding semiconductor companies Intersil has the highest dividend yield at 5.73%. The company's annual rate of dividend growth over the past ten years was very high at 16.1%, but over the past five years it did not raise its payment. In addition, ISIL suffered a loss in the trailing twelve months, and its forward P/E is very high at 28.90.
STMicroelectronics has the second-highest dividend yield at 4.26%. The company's annual rate of dividend growth over the past ten years was very high at 17.8%, but over the past five it was only 2.25%. In addition, the annual earnings growth estimates for the next 5 years of the company is very low at 5%, and it is not certain that it will be able to maintain such a high dividend rate.
Intel has the third-highest dividend yield at 4.17%. The company's annual rate of dividend growth over the past ten years was very high at 27.38%, and over the past five it was also very high at 11.94%. In addition, the annual earnings growth estimates for the next 5 years of the company is quite high at 11.75%, and the forward P/E is very low at 10.23.
The table below shows the most important parameters, for dividend-seeking investors, for the three companies.
The charts below present the historical dividend rate, the historical dividend yield and the historical prices for Intel stock.
INTC Dividend data by YCharts
INTC Dividend Yield data by YCharts
In my opinion, Intel is by far the best choice among the eight best yielding semiconductor companies I reviewed for dividend-seeking investors, due to its high yield, its higher rate of raising dividend payments and its compelling valuation metrics.
Disclosure: I am long INTC.