Applied Materials’ Battered Stock Carries a 3.2% Dividend Yield – and Hope of an Upturn in Orders

Applied Materials (AMAT), the nation’s biggest maker of semiconductor-fabrication equipment, has one of the richest dividend yields among major technology companies., including Microsoft (MSFT), Intel (INTC), Hewlett-Packard (HPQ), Oracle (ORCL) and Apple (AAPL), which later this summer begins paying a quarterly dividend.

INTC Dividend Yield Chart

INTC Dividend Yield data by YCharts

Since initiating a dividend in 2005, Applied Materials’ directors have been raising it pretty regularly, including a 13% increase in March.

AMAT Dividend Chart

AMAT Dividend data by YCharts

Most of the time, Applied Materials’ dividend has been well covered by earnings.

AMAT Earnings Per Share Chart

AMAT Earnings Per Share data by YCharts

Of course, the company’s dividend yield is relatively big these days in part because Applied Material shares have been depressed for some time.

AMAT Chart

AMAT data by YCharts

Why? For one thing, despite some hefty investments, Applied Materials has had only limited success as a maker of equipment for companies that manufacture silicon-based solar-cell products; that adjacent market hasn’t fulfilled expectations so far.

For another, Applied Materials’ orders tend to lag the chip sector. Chipmakers are having a good run currently, with booming orders from smartphone and tablet makers driving higher volume. Now, as their chip “foundries” begin to run at close to full capacity, and as new designs require new production tools, semiconductor makers are ordering more of the chip-making equipment Applied Materials sells.

Applied Materials has been reducing shares outstanding, and announced a new $3 billion stock buyback program in March. That’ll give per-share earnings a little extra help.

AMAT PE Ratio Chart

AMAT PE Ratio data by YCharts

As low interest rates have squelched many avenues for income investing, more investors are focusing on dividend stocks. Whenever we invest in a company for its dividend, of course, we’re also buying its underlying shares. Before investing in any stock, make sure to check out its fundamentals (YCharts can help with that) and read its 10-K report.

James P. Miller is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.



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