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Best Dividend Stocks Now: Skyworks

Feb. 11, 2019 4:32 AM ETSkyworks Solutions, Inc. (SWKS)TJX10 Comments


  • In a previous article, I explained what I look for in a great dividend stock.
  • After TJX, Skyworks is the second stock that I want to present as an excellent dividend stock.
  • The company yields 1.86% and has a dividend history of five years.
  • The last dividend increase was 16.67%, and I see double-digit growth for years to come since the company has no debt and a payout ratio of just 26.4%.
  • The last earnings were better than a lot of investors had feared. The stock price jumped but is still undervalued. Returns in the high teens are likely.


In my article "The Best Dividend Stocks: What To Look For?" I explained what I look for in dividend stocks. It's a combination of earnings growth, modest payout ratio and high dividend growth. I also look for stocks that are not in a declining business.

The biggest companies often underperform versus the market. In my previous article, I showed that companies that are in the second quintile of payout ratio (with an average of 41%) outperform versus the other quintiles.

In my last article, I highlighted TJX (TJX) as a very qualitative dividend grower with a long dividend history (just a few years away of dividend aristocrat status) and high dividend growth. Skyworks Solutions (NASDAQ:SWKS), on the other hand, has a much shorter dividend history, but nevertheless, I think it is one of the best dividend stocks available for long-term investors.

Skyworks may not be on the radar of most traditional dividend investors because of several factors. Probably the most common one is that it only started paying a dividend in May 2014, which means it doesn't even have a dividend streak of five years.

The other factor that spooks a lot of dividend investors, in my opinion, is the fact that Skyworks is in one of the most volatile sectors: semiconductors. The prices of stocks in that sector often make huge swings up or down, depending on the moment in the cycle of continuing overdemand and overproduction.

A third reason why Skyworks may be off the radar for most dividend investors is that the stock, just as TJX, is often under the 2% yield threshold that many dividend investors see as a limit they don't go under, although just before the most recent earnings release (when I have bought my first batch of shares of Skyworks), the stock traded at 2.1% dividend yield.

This article was written by

From Growth to Value profile picture

From Growth To Value is an individual investor with a long-term perspective. He targets high-quality disruptive businesses who have early multibagger potential. His rigorous research process provides him and his readers conviction in these companies.

He invests personally in the ideas he shares and leads the investing group Potential Multibaggers. Features of the service include: best buy list, access to his personal portfolio and watchlist, 5+ articles of individual stock coverage, weekly review regular webinars, overall quality scores, and a vibrant chat for discussions. Learn more.

Analyst’s Disclosure: I am/we are long SWKS, TJX, AAPL, AVGO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (10)

good analysis, I just bought some on Monday, for the 5G futures
From Growth to Value profile picture
Thanks for reading and your kind comment, art.
GLTU and keep growing!
The Goldman Sachs figure above reports 83% revenue exposure to China in fiscal 2017. The most recent SWKS 10-K reports 29% China revenue exposure in fiscal 2017 "based upon the location of the OEMs' headquarters" (and 25% in fiscal 2018). Which is the relevant percentage for an investor's consideration?
From Growth to Value profile picture
Hi John Fin
That is a very good remark. I think indeed GS has not taken the OEM's HQ into account and maybe the 'shipment to' count. I actually think the company's 10K may be closer to reality, but nevertheless, a lot of investors will look at the GS numbers.
Thanks for that valuable comment!
GLTU and keep growing!
The 10K is signed off by MGMT and Audited. Suggest Lean toward the 10K but use other information too. This uncertainty provides volatility, fear and greed.
Not that I don't appreciate the dividend that SWKS pays but I'm not in this stock for the dividend. There are a lot of other dividend stocks out there that have a much lower Beta which is probably what you are looking for in a dividend yield play (b/c you don't want erosion of your capital in the downswings to offset your div yields).

In any event, the real story here is 5G /and what that means for SKWS as well as others in this space. Infrastructure build out is just beginning and will require many more cell sites for 5G to work well. A wave of handset upgrades will be coming (starting in the second half of this year) and will last for several years. Not only will consumers be compelled to buy new handsets to take advantage of 5G network speeds but these handsets will contain 4G content as well for a number of years. This means not only will SWKS be selling components for a 5G enable device but also 4G so they are backward compatible with legacy networks. 5G will be great but like the shift from analog to digital networks back in 1999-2000 the availability of 5G service will not be universal thus the need for 4G capabilities for at least the first 2 or 3 generations of handsets.

Then there is the opportunity for the myriad of internet enabled or connected devices generally referred to as the Internet of Things (IoT). The following is a excerpt from a recent tech conference:

"Softbank COO Marcelo Claure estimates there will be 1 trillion connected things over the next couple decades, representing $11 trillion in economic value. For the chip industry, this translates into enormous opportunity in building the infrastructure to connect all of those things and manage the data generated by tens of billions of sensors."

So if you do the math, 1 trillion devices and $11 trillion gives you $11 per device. Let's say that SWKS and other RF component makers sell $1 in content for each device this is still a lot of potential revenue.

So I'm bullish on the growth opportunity in front of SWKS at this juncture. There may not be another opportunity this large for another decade or more.

It will be interesting how shorts will justify continued negativity in this company.
From Growth to Value profile picture
Hi Nevin
Thanks for reading and commenting.
Let me start off by saying I don't agree with 'There are a lot of other dividend stocks out there that have a much lower Beta which is probably what you are looking for in a dividend yield play.' I have a very long investing horizon and beta doesn't matter then. This is dividend investing 2.0, in which you invest for the next 20 or 30 years. Yes, you have to have the stomach to ride the ups and downs, but I am also a growth investor, so I do. I think a lot of other investors have that too. I really don't understand the fact that beta is coupled with risk. Beta is no risk, except maybe when you are (almost) retired. For the rest, it is just volatility. And that volatility has the advantage that you will have several moments in the future there are to accumulate shares of an excellent company.

For the rest, I wholeheartedly agree with your post! I pointed out in my post the opportunities as well, but you do it in much more detail. Thanks for that!
GLTU and keep growing!
Trades X Div 2/25/19 DOR 2/26 paying .38 3/19

When I think of SWKS - I'm NOT thinking about dividends. Thank you for the article!
From Growth to Value profile picture
Hi Bruce
Most people don't think of the dividend when they think of SWKS, I think. If that would be the case, I think SWKS would be higher valuated.
GLTU and keep growing!
starwitchdoctor profile picture
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