Be Sure To Check Out NXP Semiconductors N.V. (NASDAQ:NXPI) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NXP Semiconductors N.V. (NASDAQ:NXPI) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase NXP Semiconductors' shares on or after the 19th of March will not receive the dividend, which will be paid on the 9th of April.

The company's next dividend payment will be US$1.014 per share. Last year, in total, the company distributed US$4.06 to shareholders. Last year's total dividend payments show that NXP Semiconductors has a trailing yield of 2.0% on the current share price of US$201.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for NXP Semiconductors

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see NXP Semiconductors paying out a modest 41% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see NXP Semiconductors's earnings have been skyrocketing, up 63% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, seven years ago, NXP Semiconductors has lifted its dividend by approximately 22% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has NXP Semiconductors got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about NXP Semiconductors, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for NXP Semiconductors that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.