Applied Materials (NASDAQ:AMAT) Is Increasing Its Dividend To $0.40

The board of Applied Materials, Inc. (NASDAQ:AMAT) has announced that it will be paying its dividend of $0.40 on the 13th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 0.8%.

View our latest analysis for Applied Materials

Applied Materials' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Applied Materials was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 24.8%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

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Applied Materials Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.40 in 2014, and the most recent fiscal year payment was $1.60. This means that it has been growing its distributions at 15% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Applied Materials has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Applied Materials' prospects of growing its dividend payments in the future.

We Really Like Applied Materials' Dividend

Overall, a dividend increase is always good, and we think that Applied Materials is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 31 analysts we track are forecasting for Applied Materials for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.