Why the dividend investor may take a look at NASDAQ:MCHP.

Last update: Apr 8, 2024

Take a closer look at MICROCHIP TECHNOLOGY INC (NASDAQ:MCHP), a stock of interest to dividend investors uncovered by our stock screener. NASDAQ:MCHP excels in fundamentals and provides a decent dividend, all while maintaining a reasonable valuation. Let's break it down further.

Understanding NASDAQ:MCHP's Dividend Score

ChartMill employs its own Dividend Rating system for all stocks. This score, on a scale of 0 to 10, is determined by evaluating different dividend factors, such as yield, historical performance, dividend growth, and sustainability. NASDAQ:MCHP has been assigned a 7 for dividend:

Compared to an average industry Dividend Yield of 2.02, MCHP pays a better dividend. On top of this MCHP pays more dividend than 91.51% of the companies listed in the same industry.
The dividend of MCHP is nicely growing with an annual growth rate of 11.69%!
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.
36.71% of the earnings are spent on dividend by MCHP. This is a low number and sustainable payout ratio.

Evaluating Health: NASDAQ:MCHP

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. NASDAQ:MCHP was assigned a score of 5 for health:

An Altman-Z score of 4.90 indicates that MCHP is not in any danger for bankruptcy at the moment.
The Debt to FCF ratio of MCHP is 2.02, which is a good value as it means it would take MCHP, 2.02 years of fcf income to pay off all of its debts.
MCHP's Debt to FCF ratio of 2.02 is fine compared to the rest of the industry. MCHP outperforms 67.92% 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 Examination for NASDAQ:MCHP

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NASDAQ:MCHP, the assigned 9 is a significant indicator of profitability:

With an excellent Return On Assets value of 14.60%, MCHP belongs to the best of the industry, outperforming 83.02% of the companies in the same industry.
MCHP's Return On Equity of 33.28% is amongst the best of the industry. MCHP outperforms 90.57% of its industry peers.
The Return On Invested Capital of MCHP (20.20%) is better than 90.57% of its industry peers.
The last Return On Invested Capital (20.20%) for MCHP is above the 3 year average (11.80%), which is a sign of increasing profitability.
MCHP's Profit Margin of 27.59% is amongst the best of the industry. MCHP outperforms 89.62% of its industry peers.
In the last couple of years the Profit Margin of MCHP has grown nicely.
Looking at the Operating Margin, with a value of 37.14%, MCHP belongs to the top of the industry, outperforming 93.40% of the companies in the same industry.
In the last couple of years the Operating Margin of MCHP has grown nicely.
The Gross Margin of MCHP (67.03%) is better than 88.68% of its industry peers.
MCHP's Gross Margin has improved in the last couple of years.

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

For an up to date full fundamental analysis you can check the fundamental report of MCHP

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.