Yahoo Finance STMicroelectronics N.V. (EPA:STM) Passed Our Checks, And It's About To Pay A US$0.06 Dividend
STMicroelectronics N.V. (EPA:STM) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 16th of March in order to receive the dividend, which the company will pay on the 18th of March.
STMicroelectronics's next dividend payment will be €0.06 per share. Last year, in total, the company distributed €0.24 to shareholders. Looking at the last 12 months of distributions, STMicroelectronics has a trailing yield of approximately 1.0% on its current stock price of €20.69. 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! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for STMicroelectronics
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. STMicroelectronics paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 35% 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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see STMicroelectronics has grown its earnings rapidly, up 52% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. STMicroelectronics has seen its dividend decline 1.5% per annum on average over the past ten years, which is not great to see.
To Sum It Up
Has STMicroelectronics got what it takes to maintain its dividend payments? STMicroelectronics has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks STMicroelectronics is facing. For example, we've found 1 warning sign for STMicroelectronics that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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