Last update on 2024-06-27

KLA (KLAC) - Dividend Analysis (Final Score: 6/8)

Analyzing KLA (KLAC)'s dividend performance using an 8-criteria system, we've achieved a strong score of 6/8. Discover the company's strategic payout policies.

Short Analysis - Dividend Score: 6

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

The dividend analysis for KLA (KLAC) revolves around an 8-criteria scoring system to gauge performance and stability. KLA scored 6 out of 8, indicating a generally solid dividend policy. Key points include: 1. **Dividend Yield**: Higher than the industry average, but historically volatile. Notable peaks and recent stabilization is a good sign. 2. **Dividend Growth Rate (DGR)**: Average 56% over the last 20 years, showing long-term growth albeit volatile. 3. **Payout Ratio**: An average of 56.22% over the last 20 years, staying below the 65% threshold except for some outliers, suggesting prudent financial management. 4. **Earnings Coverage**: Dividends are well-covered by earnings, demonstrating financial health. 5. **Cash Flow**: Strong cash flow coverage, indicating sustainability. 6. **Stable Dividends**: Stable and increasing dividends since 2005, reflecting reliability. 7. **History**: 18 years of dividends (not 25), but consistently increasing, pointing to strong dividends policy. 8. **Stock Buybacks**: Effective and consistent share repurchase program over 20 years, showing confidence in long-term growth.

Insights for Value Investors Seeking Stable Income

Given KLA's strong dividend yield, robust long-term growth, and prudent payout strategies, it remains a promising choice for dividend-focused investors. Despite some volatility and the fact it hasn't paid dividends for 25 years, its commitment to returning value to shareholders is evident. The continuous stock repurchase program further indicates financial health. Potential investors should consider this stock for their portfolio, particularly if they prioritize consistent and reliable dividend income.

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 share price. It is often expressed as a percentage and is crucial for investors looking for income through dividends.

The dividend yield for KLA (KLAC) at 0.9204% is notably higher than the industry average of 0.34%. Historically, KLAC's dividend yield has shown significant volatility, with peaks reaching as high as 26.1661% in 2014, which may be attributed to extraordinary payouts or sharp declines in stock price. Recently, it has stabilized around 1%. Compared to the broader industry, which has maintained a relatively stable and low yield (peaking at 2.85% in 2012), KLAC offers a more attractive yield to dividend-focused investors. However, this higher yield might reflect potential risks or strategic payout decisions by the company to reward shareholders. Overall, this trend is good for KLA as it indicates a strong commitment to returning value to shareholders through dividends.

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

The Dividend Growth Rate (DGR) measures the annualized percentage growth of a company's dividend per share. A DGR higher than 5% indicates a strong income growth potential for investors.

The dividend per share growth ratio for KLA (KLAC) over the last 20 years reveals significant volatility. For some years such as 2014, the ratio shoots up exceedingly (982.3529%), whereas, for 2015, it drastically drops to -88.913%. The average over this span is roughly 56.00%, suggesting an overall robust growth in dividends. Despite the volatility, the long-term trend seems promising with a general positive trajectory—which is a positive marker for potential and current investors. This trend is good, as consistent long-term growth outshines year-on-year fluctuations.

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

average payout ratio lower than 65% in the last 20 years

The average payout ratio of KLA (KLAC) over the last 20 years is 56.22%. This is a positive indicator as it is below the 65% threshold, suggesting that the company is not overly distributing its earnings to shareholders as dividends. This prudent approach leaves the company with enough retained earnings to reinvest in its business operations or weather economic downturns. However, it is noteworthy that in 2014 and 2015, the payout ratio exceeded this threshold at 530.83% and 91.21%, respectively. These outliers warrant further examination to understand the context behind such high payout ratios during those years. Overall, the trend is favorable, supporting the company's potential for sustainably maintaining its dividend payments.

Dividends Well Covered by Earnings?

Explain the criterion for KLA (KLAC) and why it is important to consider

Dividends are well covered by the earnings. This means the company's earnings per share (EPS) should be significantly higher than its dividend per share (DPS), ensuring that the company is generating enough profit to comfortably pay its dividends without compromising its financial health. This criterion is crucial as it provides insight into the sustainability and reliability of dividend payments.

Dividends Well Covered by Cash Flow?

Explain the criterion for KLA (KLAC) and why it is important to consider

Dividends Well Covered by Cash Flow is crucial because it shows the company's ability to generate sufficient cash to cover its dividend payouts. Free cash flow is the accessible cash after the company covers its operating and capital expenditures. Ensuring dividends are well covered by cash flow indicates financial health and sustainability in maintaining or increasing dividends over time.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payments over a long period signify the reliability and sustainability of income, which is essential for income-seeking investors.

Over the past 20 years, KLA (KLAC) has demonstrated a strong commitment to providing stable and growing dividend payments to its shareholders. Beginning from 2005, when the company started paying dividends with $0.36 per share, there has been a consistent upward trajectory in the dividend value. Notably, there hasn't been any year where the dividend payment dropped by more than 20%. For instance, the dividend per share in 2013 was $1.70, followed by a sharp increase to $18.40 in 2014. This notable spike is exceptional and might be attributed to special dividends or stock splits. Post-2014, the dividends have seen stable and consistent growth from $2.04 in 2015 to $5.35 in 2023. This trend highlights a robust dividend strategy, growing investor confidence, and the company's ability to generate sustainable earnings. Such stability ensures that investors who rely on income from dividends can trust KLA to deliver relatively predictable returns, making it a potentially attractive investment for income-seeking individuals.

Dividends Paid for Over 25 Years?

Why it is important for a company to pay dividends for over 25 years.

Based on the provided data, KLA (KLAC) has not been paying dividends for over 25 years. Their first recorded dividend payment was in 2005 with $0.36 per share. While the absolute time period doesn't meet the 25-year threshold, the consistent increase in dividends over the past 18 years can be seen as a positive trend. Nearly two subsequent decades of dividend payments underscore a commitment to returning value to shareholders. KLA went from $0.36 per share in 2005 to $5.35 per share in 2023, a remarkable growth typically indicative of financial health and robust profitability. Investors should remain cognizant of the commitment to continue this trend going forward. Considering its consistent upward trajectory in dividends, this trend is positive, even if the 25-year marker isn't reached.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company consistently buys back its own shares, reducing the total number of shares outstanding, which can increase earnings per share.

Analyzing the provided numbers, KLA (KLAC) has shown a consistent trend of repurchasing shares over the last 20 years. Starting from 194.8 million shares in 2003, the number has decreased to 139.5 million shares in 2023. Specific mention of reliable repurchase years gives further credence to their disciplined approach: notable reductions happened in 2005, 2008, 2009, 2011, 2012, 2013, 2014, 2015, 2016, 2018, 2019, 2021, 2022, and 2023. This trend suggests that over the long term, KLA is reducing its outstanding shares effectively. An average yearly repurchase rate of -1.6012% signifies a strong buyback policy, which is positively correlated with potential increases in earnings per share and shareholder value. This is a promising trend for long-term investors as it reflects the company's confidence in its financial health and future growth.