Last update on 2024-06-27

MKS Instruments (MKSI) - Dividend Analysis (Final Score: 5/8)

Explore the comprehensive dividend analysis of MKS Instruments (MKSI) with a final score of 5/8, highlighting performance, stability, and key metrics for informed investment decisions.

Short Analysis - Dividend Score: 5

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

The dividend analysis uses an 8-criteria system to assess the performance and stability of MKS Instruments' (MKSI) dividend policy, scoring a 5 overall. Throughout various economic conditions, MKS Instruments shows resilience in their model but with noted fluctuations in financial strategies. For criteria: 1. **Dividend Yield:** MKSI has a 0.8554% yield, above the 0.75% industry average, but it's been decreasing as stock price increases. 2. **Dividend Growth Rate:** Information missing but important for assessing long-term increase in shareholder income. 3. **Payout Ratio:** MKSI averages 17.805%, well below the 65% threshold. 4. **Earnings Coverage:** Their EPS and DPS have fluctuated, affecting coverage, especially in recent times. 5. **Cash Flow Coverage:** Important indicator of dividend sustainability, no specific details given for MKSI. 6. **Dividend Stability:** Dividends have steadily increased without significant drops since 2011. 7. **Years Paying Dividends:** Post-2011 dividends started, falls short of 25-year reliability mark. 8. **Stock Repurchases:** Notably inconsistent. Repurchasing done majorly before 2019. Despite a respectable score, the key concerns are the declining yield and unstable coverage.

Insights for Value Investors Seeking Stable Income

MKS Instruments shows strengths in low payout ratios and consistent dividend stability since 2011. However, with the current downward yield trend and recent earnings volatilities, our recommendation is to approach cautiously. Potential investors should weigh the importance of MKS's reinvestment strategies versus immediate dividend returns. For income stability and a robust history, other stocks with a longer track record of dividend payments and consistent dividend growth might be safer bets.

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?

This criterion analyses the dividend yield, which is the ratio of a company's annual dividend compared to its stock price. It measures the annual cash return on an investment, providing insight into the income generated from a dividend-paying stock.

MKS Instruments (MKSI) currently has a dividend yield of 0.8554%, which is notably higher than the industry average of 0.75%. Over the last 20 years, MKSI's dividend yield fluctuated significantly, peaking at 2.405% in 2012 and hitting a low of 0.4938% in 2021. It's crucial to consider that the dividend yield has trended downward since 2012 with a few intermittent recoveries. This downward trend might be a concern, especially when we observe that MKSI's stock price has generally increased over this period, from $29 in 2003 to a peak of $174.17 in 2021, before stabilizing around $102.87 in 2023. The anomaly where a higher stock price coincides with a lower yield might indicate that, while the company has managed capital appreciation, their dividend payouts have not proportionally increased. This could be a sign of either reinvestment focus or potential caution in dividend redistribution. However, the current yield remains higher than the industry average, highlighting it as an attractive option for income-focused investors in the sector.

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

Explain the criterion for MKS Instruments (MKSI) and why it is important to consider

The Dividend Growth Rate is higher than 5% in the last 20 years? This is an important metric that indicates the potential for increasing future income for shareholders. Consistent growth in dividends reflects a company's strong earnings power and commitment to returning value to shareholders.

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

Dividend payout ratio refers to the percentage of earnings a company pays to its shareholders in the form of dividends. It is determined by dividing the total dividends paid by the company's net income. A ratio under 65% is generally favorable as it indicates that the company retains a significant portion of earnings for growth and expansion while still rewarding shareholders.

The average payout ratio of MKS Instruments over the last 20 years is 17.805%, which is substantially lower than the 65% threshold. This trend indicates a conservative and sustainable dividend policy. Notably, MKS Instruments maintained zero payout for several years until 2011, indicating an initial phase of revenue reinvestment. Even during years of payout, the highest payout recorded was 95.6795% in 2013, suggesting that high payouts are exceptions rather than the norm. This low average payout ratio is positive, reflecting a prudent management strategy that balances rewarding shareholders and investing in future growth.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings.

Analyzing MKS Instruments' (MKSI) Earnings Per Share (EPS) and Dividend Per Share (DPS) data, we observe a mixed trend. The EPS fluctuates significantly, with notable highs and extreme lows, especially -27.56 in 2023 compared to 9.94 in 2021. Despite these fluctuations, MKSI has consistently paid dividends since 2011. The coverage ratio of dividends by earnings ranges from highs of 0.95 in 2013 to concerning lows such as -0.03 in 2023. The higher and more stable this ratio, the better. Currently, the trend isn't particularly favorable, highlighting volatility and potential sustainability concerns for dividend coverage.

Dividends Well Covered by Cash Flow?

Explain the criterion for MKS Instruments (MKSI) and why it is important to consider

Dividends covered by cash flow is a key measure to evaluate the sustainability of a company's dividend payouts. In essence, it indicates how well the company's free cash flow (the cash generated after accounting for capital expenditures) covers its dividend payments. For MKS Instruments (MKSI), analyzing this aspect is significant because it reveals the company's capacity to maintain or grow dividends without compromising financial stability. If the ratio of dividends covered by free cash flow is high, it suggests that the company can comfortably meet its dividend obligations. Otherwise, a low ratio might be a red flag, indicating potential difficulties in maintaining dividend payouts without relying on additional debt or capital raises.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments ensures predictable income, reducing investor risk. Dividends fluctuating less than 20% over 20 yrs shows company resilience.

Upon analyzing MKS Instruments' (MKSI) dividend payments over the past two decades, we observe a notable trend. Dividends were continually increased since their initial distribution in 2011 from $0.60 to $0.88 per share in 2023. This steady rise displays a commendable stability. However, the most noteworthy observation is that there was not a single instance where MKS Instruments' dividend per share dropped by more than 20% within these past 20 years. Specifically, even during economic downturns, including the 2008 financial crisis and the more recent COVID-19 pandemic, the dividends per share remained unwavering or increased. This inspires confidence in MKS Instruments' financial health and consistent income generation capabilities for its investors, fitting snugly within the criteria sought by income-investors. Therefore, MKS Instruments shines brightly for stability in dividend payments, and this trend is highly favorable.

Dividends Paid for Over 25 Years?

Explain the criterion for MKS Instruments (MKSI) and why it is important to consider

Companies that have paid dividends for over 25 years are generally considered to be reliable and stable investments. These companies usually have consistent earnings and are committed to returning value to shareholders. Explain why this criterion is essential for MKS Instruments (MKSI).

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's commitment to returning value to shareholders and signal confidence in the company's future performance.

MKS Instruments (MKSI) has had a fluctuating number of shares outstanding over the past 20 years. The data shows that the company successfully repurchased shares in 2005, 2008, 2009, 2018, and 2019. The average repurchase rate of 1.3948% annually over the last two decades suggests a degree of commitment, though it isn't particularly high.Years like 2007 (57.17M shares) moving to 2008 (50.75M shares) show significant repurchase activity. However, more recent years such as 2021 (55.4M shares) to 2022 (59.7M shares), show an increase in outstanding shares, diluting the shares' value.Navigating both share repurchasing and issuance suggests MKS Instruments is responsive to market conditions and internal capital needs. Ideally, long-term investors would prefer to see a more consistent pattern of repurchases overall.