NXP Semiconductors N.V. (NASDAQ:NXPI) has announced that it will pay a dividend of $1.01 per share on the 9th of April. Based on this payment, the dividend yield on the company's stock will be 1.8%, which is an attractive boost to shareholder returns.

See our latest analysis for NXP Semiconductors

NXP Semiconductors' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by NXP Semiconductors' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 41.8%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

NXP Semiconductors Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 7 years was $1.00 in 2018, and the most recent fiscal year payment was $4.06. This means that it has been growing its distributions at 22% per annum over that time. NXP Semiconductors has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. NXP Semiconductors has impressed us by growing EPS at 63% per year over the past five years. NXP Semiconductors is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like NXP Semiconductors' Dividend

Overall, we like to see the dividend staying consistent, and we think NXP Semiconductors might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for NXP Semiconductors that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.