Last update on 2024-06-27

Amkor Technology (AMKR) - Dividend Analysis (Final Score: 6/8)

Discover the comprehensive dividend analysis of Amkor Technology (AMKR) with a final score of 6/8, focusing on performance, stability, and investing insights.

Short Analysis - Dividend Score: 6

We're running Amkor Technology (AMKR) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company’s annual dividend compared to its current stock price. A higher yield can indicate a potentially attractive investment, offering investors a return on their investment through dividends alone.

As of 2023, Amkor Technology (AMKR) boasts a dividend yield of 0.9137%, appreciably higher than the industry average of 0.65%. This divergence suggests that AMKR prioritizes returning value to shareholders through dividends, making it an appealing choice for income-focused investors. Notably, this upward trend in dividends began relatively recently in 2020, when AMKR first initiated its dividend payouts at a yield of 0.2653%, steadily rising each subsequent year to 0.6858%, 0.9383%, and current 0.9137% in 2023. Furthermore, dividends per share grew notably from $0.04 in 2020 to $0.304 in 2023, showcasing AMKR's commitment to enhancing shareholder value. From a market perspective, AMKR's stock price increased significantly from $15.08 in 2020 to $33.27 in 2023, indicating strong investor confidence and a robust market valuation. The dividend yield surpassing the industry average doesn't merely reflect higher payouts but a possibly well-managed and profitable entity willing to share profits significantly with shareholders. A consistently rising trend in dividend payout is a positive sign, indicating financial health and sustainability.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth of a company’s dividend payments over a specific period. Ideally, investors look for a dividend growth rate of more than 5%, as this reflects a company’s ability to consistently increase its payouts to shareholders, which can be seen as a sign of financial health and management’s confidence in future earnings.

Reviewing the dividend per share ratio for Amkor Technology over the last 20 years, it is evident that the company only started paying dividends in 2021. The dividend per share ratio was 325 in 2021, 32.3529 in 2022, and 35.1111 in 2023. This late initiation of dividends means there's less than a three-year span to consider for any growth rate analysis. Additionally, there appears to be a significant decrease from 2021 to 2022 with a minor increase from 2022 to 2023. Calculating the compounded annual growth rate (CAGR) from 2021 to 2023, we get: [(35.1111/325)^(1/2) - 1] * 100 = -76.37%. This dramatic negative growth does not meet the desirable criterion of a growth rate higher than 5%. This can be interpreted as a negative trend in the context of dividend growth consistency. However, given that Amkor Technology has recently started paying dividends, interpreting long-term trends based on a very short time frame can be misleading.

Average annual Payout Ratio lower than 65% in the last 20 years?

A payout ratio below 65% indicates that the company retains a significant portion of its earnings, allowing for further investment and growth. It also suggests that the company has a cushion to maintain dividend payments even if earnings fluctuate.

Amkor Technology (AMKR) has demonstrated a commendably low average payout ratio of 1.77% over the past 20 years, significantly below the 65% threshold. This trend indicates a conservative approach to dividend distributions, ensuring that ample earnings are retained for reinvestment and growth. Specifically, the payout ratio only began to increase modestly from 2020 onwards, most notably in 2023, reaching 20.75%. These recent increases can be interpreted as a sign of the company’s increasing confidence in its earnings stability and a willingness to return more value to shareholders compared to previous years. The consistently low payout ratio is a positive indicator of Amkor Technology's financial prudence and strategic business management.

Dividends Well Covered by Earnings?

The relationship between earnings per share (EPS) and dividends per share (DPS) is essential to assess the sustainability of dividend payments. If EPS is consistently higher than DPS, it signifies that a company is generating enough profit to cover its dividend distributions, without risking its financial stability. Conversely, if DPS exceeds EPS, it indicates that the company might be paying out more in dividends than it is earning, which could be a red flag for long-term sustainability. Therefore, analysing the coverage of dividends by earnings is crucial for evaluating the financial health and dividend policies of a company.

Examining Amkor Technology's data, we see that from 2003 to 2017, the company did not pay dividends. Starting in 2018, dividends were introduced modestly at $0.04 per share, and gradually increased to $0.304 per share by 2023. Notably, EPS has generally shown an upward trend since 2016, peaking at $3.1299 in 2022 before dropping to $1.4649 in 2023. When exploring the coverage ratio—dividends covered by earnings—the numbers initially hover around zero from 2018 due to the high EPS and low DPS then. However, the ratio improves over the years to about 0.21 by 2023. This suggests a positive but modest trend indicating that dividends are adequately covered by earnings, even though the EPS drop in 2023 hints at a need to monitor ongoing trends. Overall, this is a healthy trend demonstrating Amkor's ability to support its dividend payments from its profits, though vigilance is needed as dividend payments increase.

Dividends Well Covered by Cash Flow?

Examining if dividends are well covered by cash flow assesses a company's ability to maintain its dividend payments. Strong coverage indicates financial stability.

Amkor Technology's (AMKR) history of Free Cashflow and Dividend Payout reflects an evolving trend. From 2003 to 2012, Amkor had no dividend payouts, while its Free Cashflow fluctuated significantly, showing several negative values. Post-2013, dividend payments began, and here cashflow coverage becomes critical. The ratios fluctuated; for instance, 0.44 in 2018 indicated healthy coverage. However, the inconsistent positive cash flows and dividend coverage less than 1 in many years (e.g. 0.14 in 2023) reveal potential challenges in maintaining steady dividend payouts. Overall, while recent years highlight some improvement with positive Free Cashflow and reasonable coverage, the lower coverage in certain years suggests the need for vigilance. A higher ratio consistently is preferable for reliability in dividends.

Stable Dividends Since the Company Began Paying Dividends?

Assessing the stability of dividend payments over a long horizon helps ensure consistent income for investors, which is crucial for financial planning.

Examining the dividend payments of Amkor Technology (AMKR) over the past 20 years, we observe a notable shift starting in 2020. Prior to 2020, AMKR did not pay out any dividends. From 2020 onwards, the dividends per share began at $0.04, increased to $0.17 in 2021, rose further to $0.225 in 2022, and reached $0.304 in 2023. Given this limited timeframe, the stability criterion becomes difficult to judge. However, it is imperative to acknowledge that there was no reduction in dividends by over 20% within this period. Rather, there has been a commendable upward trajectory. While it is a positive sign, the lack of a longer track record of consistent dividend payments, specifically spanning the two decades as required by the criterion, can be seen as a limitation. This limited history may concern conservative, income-seeking investors who prioritize long-term stability.

Dividends Paid for Over 25 Years?

Analyse if a company has been paying dividends consistently for over 25 years and why it is important to consider

Examining whether a company has been paying dividends consistently for over 25 years serves as a barometer of financial stability and corporate responsibility. Consistent dividend payments over long periods indicate that the company thrives in maintaining sufficient free cash flow, steady revenue streams, and prudent fiscal management. It instills confidence among shareholders and potential investors regarding the firm’s ability to generate continual returns.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate that the company is confident in its own financial stability and growth potential, which is a positive signal for investors and can boost share prices.

Over the past 20 years, Amkor Technology (AMKR) has engaged in stock repurchases during five distinct years: 2008, 2011, 2012, 2013, and 2019. The number of shares decreased during these years, indicating solid instances of share buybacks. For instance, the reduction from 263,379,000 shares in 2008 to 182,734,000 shares in 2009 highlights a significant share repurchase initiative. Similarly, the consistent decrease from 282,602,000 in 2010 to 235,330,000 in 2013 also reinforces this pattern. On average, AMKR has conducted stock repurchases at a frequency of approximately 2.4 times per 20 years. Though the average repurchasing frequency is not very high, the years in which buybacks were executed saw substantial reductions in share count, which can positively impact earnings per share (EPS) and offer additional value to shareholders. The trend is moderately good but would be stronger if more consistent repurchase activities were observed.