Balancing Dividends and Fundamentals: The Case of NASDAQ:MCHP.

Our stock screener has spotted MICROCHIP TECHNOLOGY INC (NASDAQ:MCHP) as a good dividend stock with solid fundamentals. NASDAQ:MCHP shows decent health and profitability. At the same time it gives a good and sustainable dividend. We'll dive into each aspect below.

Exploring NASDAQ:MCHP's Dividend

ChartMill assigns a Dividend Rating to every stock. This score ranges from 0 to 10 and evaluates the different dividend aspects, including the yield, the growth and sustainability. NASDAQ:MCHP scores a 7 out of 10:

• MCHP's Dividend Yield is rather good when compared to the industry average which is at 2.17. MCHP pays more dividend than 90.48% of the companies in the same industry.
• On average, the dividend of MCHP grows each year by 11.69%, which is quite nice.
• MCHP has been paying a dividend for at least 10 years, so it has a reliable track record.
• MCHP has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
• MCHP pays out 32.09% of its income as dividend. This is a sustainable payout ratio.

Analyzing Health Metrics

Every stock is evaluated by ChartMill, receiving a Health Rating on a scale of 0 to 10. This assessment considers different health aspects, including liquidity and solvency, both in absolute terms and relative to industry peers. NASDAQ:MCHP has achieved a 5 out of 10:

• An Altman-Z score of 4.63 indicates that MCHP is not in any danger for bankruptcy at the moment.
• The Debt to FCF ratio of MCHP is 1.92, which is an excellent value as it means it would take MCHP, only 1.92 years of fcf income to pay off all of its debts.
• MCHP has a better Debt to FCF ratio (1.92) than 63.81% of its industry peers.
• Although MCHP does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

Profitability Assessment of NASDAQ:MCHP

Discover ChartMill's exclusive Profitability Rating, a proprietary metric that assesses stocks on a scale of 0 to 10. It takes into consideration various profitability ratios and margins, both in absolute terms and relative to industry peers. Notably, NASDAQ:MCHP has achieved a 9:

• Looking at the Return On Assets, with a value of 15.16%, MCHP belongs to the top of the industry, outperforming 80.95% of the companies in the same industry.
• MCHP's Return On Equity of 36.12% is amongst the best of the industry. MCHP outperforms 91.43% of its industry peers.
• With an excellent Return On Invested Capital value of 21.46%, MCHP belongs to the best of the industry, outperforming 90.48% of the companies in the same industry.
• The last Return On Invested Capital (21.46%) for MCHP is above the 3 year average (11.80%), which is a sign of increasing profitability.
• MCHP has a Profit Margin of 28.14%. This is amongst the best in the industry. MCHP outperforms 87.62% of its industry peers.
• MCHP's Profit Margin has improved in the last couple of years.
• The Operating Margin of MCHP (38.68%) is better than 92.38% of its industry peers.
• MCHP's Operating Margin has improved in the last couple of years.
• The Gross Margin of MCHP (67.93%) is better than 88.57% of its industry peers.
• In the last couple of years the Gross Margin of MCHP has grown nicely.

Every day, new Best Dividend stocks can be found on ChartMill in our Best Dividend screener.

Our latest full fundamental report of MCHP contains the most current fundamental analsysis.

Keep in mind

This article should in no way be interpreted as advice in any way. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.