Are You Missing This Stock's Massive Dividend Raise?  

Recently, semiconductor giant Applied Materials (NASDAQ: AMAT) increased its quarterly dividend by 25% to $0.40 per share from $0.32. That huge rise followed a 23% hike in 2023 and is part of the company's ambition to treble its dividend in the next years.

A massive dividend increase like that gives long-term owners a cash return for their investment risk. For those who don't own Applied Materials' stock, the bump raises the question: Are you losing out on this stock's big dividend raise?

On one side, Applied Materials can afford to raise its dividend to $1.60 per share. In the preceding four quarters, it earned $8.50 per share, a modest 19% payout ratio. Despite that rise, its dividend yield is around 1%.

That low payout ratio and yield indicate that Applied Materials is new to dividends. With profits growth forecast to average 15% over the next five years, the market expects more growth returns than dividends.

Given what's happening today, individuals who don't own Applied Materials' stock aren't missing out on much dividend-wise. Despite the substantial boost, the low base and small yield suggest dividend-seeking investors can readily discover better options.

However, in 2023, Applied Materials stated that company was confident in its ability to double its payout over several years. Applied Materials is maintaining enough cash to reinvest for growth while increasing its dividend by 25% at a time when its growth prospects are 15%.

Nothing is guaranteed about dividends until they are disclosed. However, Applied Materials' forecasted dividend and earnings trajectory suggest it is positioning itself to provide a reasonable income stream over time. People investing in its shares now may not get a tremendous present income stream, but they may get a terrific future one. The company's shares sell at 23 times its trailing earnings, so investors aren't overpaying for its prospects.

Net, dividend stock investors who care about present income may be disappointed, but those who care about future income growth may be excited. Applied Materials' quick dividend increase and reasonable payout ratio appeal to investors seeking a solid and expanding firm.

Thus, its dividend is the cherry on top. The company appears to have a good long-term total return due to increased earnings and dividends. Nothing in investing is sure until it happens, but Applied Materials seems promising for long-term investors.

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