Lam Research’s (LRCX) recent price rise offsets impressive dividend growth.

Lam Research’s (NYSE:LRCX) dividend was increased by a solid 50% last week. Its overall yield is 1.76%. The firm started paying a dividend in 2014.

Lam is primarily focused on the etch semiconductor market, which is a key element in fabricating semiconductors.  It designs and manufactures utilized production of semiconductors. Its major products include Vector and Kiyo. The firm is global in nature and sells it products to major technology firms such as Taiwan Semi and Samsung. Lam Research was founded in 1980 and is headquartered in Fremont, California.

Lam Research has maintained an incredible two-year growth rate of dividends of 205 percent. Lam Research currently ranks 3rd in yield within the large cap technology, semiconductor equipment and materials category. The quarterly dividend for the January payment will be $0.45 versus the prior year rate of $0.30 per share. Lam Research Corp. is not a member of our Top 100 Dividend Stock List (see below).

The dividend will be paid at the new higher rate on January 4, 2017, to shareholders of record at close of business on December 14, 2016. Lam Research is currently priced at $102.40. Listed in the table below are the quarterly dividend payments since 2014.

Date Quarterly Dividend
12/14/2016 0.45
9/12/2016 0.3
6/6/2016 0.3
3/7/2016 0.3
12/7/2015 0.3
9/4/2015 0.3
6/8/2015 0.3
3/9/2015 0.18
12/8/2014 0.18
9/8/2014 0.18
6/9/2014 0.18

Quantitative Analysis:

We examine Lam Research upon our five key criteria, which include; 

Category Value Score
Dividend Yield 1.76% 316
Dividend Growth (2 year avg) 205% NA
Forward P/E 11.1  66
S&P Financial Rating BBB 160
Beta  1.15  175
Total Score   NA

Additional quantitative information on P/S ratio and historical yield;

% Yield 2 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr lowest Yield % 5 yr max Yield %
1.76% 205% NA 36.74 2.68 1.44 4.28 0.00% 1.82%

Positives;

  • Lam Research maintains an investment grade credit rating and a current dividend yield (1.76%) its five-year maximum.
  • Lam Research has maintained a growth rate of dividends of 205 percent since it started paying dividends in July 2014.
  • Lam Research is trading below its ten-year average price/sales (P/S) ratio.

Negatives;

  • Lam Research’s dividend yield is below that of the S&P 500 Index.
  • Lam Research maintains a beta of 1.15, higher than the average company.

Latest Earnings & Overall Analysis:

Lam Research issued its earnings data on October 19th. The company reported $1.81 EPS for the quarter, topping the consensus estimate of $1.78 by $0.03. The company had revenue of $1.63 billion in Q4. This was in line with expectations. Lam Research revenue climbed just over 2.0% over last year’s results. Lam Research maintains a solid return on equity of 18.59%.

It recently had a setback with its failed merger with KLA-Tencor. But the firm continues to have excellent prospects. This includes advanced logic and increasing demand for 3-D Nandy products. As the leading firm in the etch market, Lam Research is well insulated from the competition. The company has also made several smart acquisitions to gain depth of product including  SEZ  and the merger with Novellus, which held a top market share position in depositions.   Lam does face competition from two large competitors, but has a strong record of development with a strong commitment to R&D.

LRCX hosted an analyst day on November 18th. Management was very upbeat on the prospects for 2017. The firm indicated that next quarter shipments were to be up more than 20%, higher than consensus expectations. The firm also announced a large $1 billion stock buyback targeting earning per share of $11.   The company currently trades at $106 a share. Based upon expectations for 2017 earnings per share of $9.50, the firm trades at  a mere 11 times earnings. It price/sales ratio is also low based upon historical standards. However, the price of the stock was $64 earlier this year, so the stock has moved by a large margin the past six month.  We would wait for a better entry point on price. Based on the firm’s recent stock strength, lower than average dividend yield and high beta, Lam Research does not qualify as a member of our  Top 100 Dividend Stocks

Lam Research Corp. Dividend Yield Chart (Click to enlarge)

lrcx

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years.

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