Last update on 2024-06-27

Skyworks Solutions (SWKS) - Dividend Analysis (Final Score: 6/8)

Skyworks Solutions (SWKS) dividend analysis scores 6/8, assessing dividend performance, growth, and sustainability over 20 years.

Short Analysis - Dividend Score: 6

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

Skyworks Solutions (SWKS) has a strong dividend yield of 2.3128%, significantly higher than the industry average of 0.65%. The company has also demonstrated a consistent increase in dividend yield since it began paying dividends in 2014. The average annual payout ratio over the past 20 years is a low 12.98%, well below the 65% threshold, reflecting good dividend sustainability. Dividends have been well-covered by both earnings and free cash flow, and the company has maintained stable and consistent dividends without significant drops since 2014. However, the company has only a 9-year history of paying dividends, falling short of the 25-year mark preferred by conservative investors. While stock repurchases have become more consistent in the last seven years, they were not a strong focus over the past two decades. Overall, Skyworks Solutions shows strong dividend performance but lacks the long-term history some investors may be looking for.

Insights for Value Investors Seeking Stable Income

Skyworks Solutions (SWKS) is worth considering for income-focused investors due to its strong and consistent dividend yield, low payout ratio, and well-covered dividends by both earnings and cash flow. However, conservative investors seeking long-term dividend history may find the company's relatively short 9-year dividend payment history less appealing. Potential investors should weigh the company's robust recent performance against its shorter track record before making a decision.

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 is the dividend per share annualized and divided by the stock price, reflecting the earnings returned to shareholders.

Skyworks Solutions (SWKS) has a current dividend yield of 2.3128%, significantly higher than the industry average of 0.65%. This is a strong positive indicator for income-focused investors, suggesting that the company returns a substantial portion of its earnings to shareholders. Examining the last 20 years, SWKS initiated its dividend payouts in 2014 with a yield of 0.4814% and has shown a steady increase, peaking at 2.5897% in 2022. The consistent improvement in yield reflects the company's robust financial health and commitment to rewarding shareholders. In contrast, the industry average has fluctuated, peaking at 1.41% in 2013 and currently standing much lower. The stark difference between SWKS's yield and the industry average underlines the company's superior dividend performance.

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

How to analyse the growth rate of dividends over a period (20 years) and what constitutes a good rate (over 5%).

An analysis of Skyworks Solutions (SWKS) dividend growth rate data over the last 20 years. Evaluate if it's higher than 5% and interpret the given numbers regarding dividend per share ratio changes and the average ratio.

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

The Average Payout Ratio measures the proportion of earnings a company pays to shareholders in the form of dividends. A lower payout ratio is generally better, as it indicates sustainable dividend payments and earnings retention for growth.

The Average Payout Ratio for Skyworks Solutions over the past 20 years is 12.98%, which is well below the 65% threshold. This is an excellent indicator of the company's dividend sustainability and financial health. Historically, Skyworks Solutions has maintained a conservative approach to dividend payouts, which allows for more retained earnings to be reinvested into the business for growth. This low payout ratio is a very positive trend, reflecting that the company has ample room to grow its dividends in the future without compromising financial stability.

Dividends Well Covered by Earnings?

Dividends are typically paid out of earnings, so it is important to ensure that a company's earnings per share (EPS) are sufficient to cover its dividends per share (DPS). A well-covered dividend is a sign of financial health and sustainability.

Let's analyze the earning per share (EPS) and the dividend per share (DPS) trends for Skyworks Solutions over the years. The company's EPS has generally shown an upward trend, although there have been fluctuations. In 2008, EPS was 0.6738, and it steadily increased to reach a peak of 9.0696 in 2021 before declining to 6.1656 in 2023. On the other hand, the company started paying dividends in 2014, with a DPS of 0.35. Since then, DPS has increased annually, reaching 2.6 in 2023. Comparing the EPS and DPS, we see that in recent years, the earnings per share have always been sufficient to cover the dividends per share. For instance, in 2021, EPS was 9.0696, covering the DPS of 2.12 multiple times over (by about 4.276 times). Similarly, in 2022 and 2023, despite a decline in EPS, it was still ample to cover the respective dividends by 3.327 and 2.371 times, respectively. Overall, the trend of EPS being significantly higher than DPS is favorable. It indicates that Skyworks Solutions' dividends are well-covered by earnings, which is a good sign of financial health and ensures dividend sustainability. However, the recent downward trend in EPS should be monitored to ensure future dividends remain covered.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

From 2003 to 2023, Skyworks Solutions' free cash flow figures show a significant upward trend, especially from 2010 onwards. Concurrently, the company's dividend payouts, starting from 2014, have also been on the rise. The ratio of dividend payout to free cash flow serves as a key indicator here. A ratio consistently below 1 indicates that the dividends are well covered by the company's free cash flow, signifying the company's capacity to return value to shareholders without jeopardizing its financial stability. From the data provided, it is evident that the dividends have indeed been covered well by the free cash flow, with ratios remaining below 0.5. In particular, the ratio has seen progressive improvement post-2018, peaking at approximately 0.41x in 2020 which signifies a robust cash position. Overall, the trend of Skyworks Solutions indicates a healthy practice of maintaining a balance between rewarding shareholders and managing its financial health, which is essential for potential investors looking for steady income through dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past company performance and ability to generate consistent returns. It is crucial for income investors seeking reliable income sources.

Examining the dividend per share data for Skyworks Solutions (SWKS) over the past 20 years, it is observed that the company did not pay dividends up until 2014. From 2014 onwards, the dividend per share has shown a consistent upward trend from $0.35 in 2014 to $2.60 in 2023. There was no significant drop, let alone a drop of more than 20%, in any of the years where dividend payments were made. This consistent increase indicates a strong and stable dividend policy, which is a positive trend for income-seeking investors. The absence of a more than 20% drop in any year further emphasizes reliability in dividend payments, aligning well with the criterion of stability.

Dividends Paid for Over 25 Years?

Examining whether a company has paid dividends for over 25 years helps assess its financial stability and commitment to returning value to shareholders.

Skyworks Solutions (SWKS) has not paid dividends for over 25 years. Their first recorded dividend per share was in 2014, which means they have only a 9-year history of consistent dividend payments. This trend indicates that the company might be less reliable for conservative-investors who prioritize long-term dividend stability. While the increasing dividend per share from $0.35 in 2014 to $2.60 in 2023 is a positive indicator of growing returns to shareholders, it doesn't compensate for the shorter historical period of dividend payouts when evaluating this specific criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate management's confidence in the company's future and can support higher earnings per share (EPS) by reducing the number of outstanding shares. This is important for long-term dividend sustainability.

From the data provided, Skyworks Solutions (SWKS) shows a mixed trend concerning stock repurchases in the past 20 years. There were increases in the outstanding shares from 2003 to 2014, peaking at 194.9 million in 2015. However, since 2016, there has been a consistent decline in the number of shares, with the figures dropping from 192.1 million in 2016 to 159.4 million in 2023. This indicates that the company has been engaging in more active stock repurchases over the last seven years. The average repurchase rate of 0.7383 over the last 20 years suggests that Skyworks Solutions has not heavily focused on stock buybacks over the entire period, primarily concentrating on them more recently. This recent trend is a positive indicator as it reflects increased management confidence and could contribute to enhanced shareholder value in the long term. Thus, for the last seven years, the stock repurchase trend is good for the company's dividend sustainability.