Interested In Microchip Technology's (NASDAQ:MCHP) Upcoming US$0.37 Dividend? You Have Two Days Left

NASDAQ:MCHP) is about to trade ex-dividend in the next two days. You will need to purchase shares before the 20th of August to receive the dividend, which will be paid on the 4th of September.” data-reactid=”28″>Microchip Technology Incorporated (NASDAQ:MCHP) is about to trade ex-dividend in the next two days. You will need to purchase shares before the 20th of August to receive the dividend, which will be paid on the 4th of September.

Microchip Technology’s next dividend payment will be US$0.37 per share, and in the last 12 months, the company paid a total of US$1.47 per share. Based on the last year’s worth of payments, Microchip Technology stock has a trailing yield of around 1.5% on the current share price of $100.2. 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! As a result, readers should always check whether Microchip Technology has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Microchip Technology ” data-reactid=”30″>View our latest analysis for Microchip Technology

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. Microchip Technology paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Microchip Technology generated enough free cash flow to afford its dividend. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

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.

here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Microchip Technology earnings per share are up 7.7% per annum over the last five years. Decent historical earnings per share growth suggests Microchip Technology has been effectively growing value for shareholders. However, it’s now paying out more than half its earnings as dividends. Therefore it’s unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Microchip Technology has delivered 0.8% dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy Microchip Technology for the upcoming dividend? While earnings per share growth has been modest, Microchip Technology’s dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

4 warning signs for Microchip Technology (1 can’t be ignored!) that you ought to be aware of before buying the shares.” data-reactid=”55″>On that note, you’ll want to research what risks Microchip Technology is facing. To help with this, we’ve discovered 4 warning signs for Microchip Technology (1 can’t be ignored!) that you ought to be aware of before buying the shares.