Friday, February 8, 2013

MICROCHIP TECHNOLOGY, MCHP 2013 Dividend Machine



Microchip Technology, symbol MCHP is company very similar to Intel.  Both have qualified as dividend machines in 2011 and 2012 and now again in 2013.  Their dividend fundamentals are similar.   Often times, I own more than one company in a given space in order to diversify my holdings within an industry.


SIMILARITY TO INTEL

Microchip, like Intel, produces computer chips.  Both companies are mature.  Investors do not look to either company for rapid growth.   Their stock prices are stuck in a trading range and some analysts consider them dead money.   Yet each company has been a money machine for income investors.


DIVIDEND MACHINE
2/7/2013
Microchip Technology
MCHP
Price when profiled
$33.94
Last 4 Qtrs Earnings
$1.40
Last 4 Qtrs Dividends
$1.40
Current Qtr Dividend
$0.353
Annualized Div Yield
4.16%
No. Years Div Increase
Since 2002
Debt/Equity ratio
0.49
DIVIDEND FUNDAMENTALS


Microchip is a much smaller company than Intel and the stock price is a bit more volatile.  Over
the past year, MCHP bought another company in order to diversify the product line.  The acquisition was viewed with great skepticism and the stock price suffered.   In 2011 MCHP traded around $33 per share when I profiled it.  Early in 2012 MCHP’s stock traded around $37 per share when I profiled it.  Later in 2012 MCHP’s stock price slipped back to $33 per share.


Today, MCHP announced their most resent earnings and they beat estimates on both the top line and the bottom line.   Just as they have in the past, MCHP rewarded it shareholders by again increasing the dividend.

The table above presents MCHP’s dividend fundamentals.  With a yield of 4.16%, MCHP is a good buy.   They have a strong balance sheet and have shown they know how to use their cash.  In the past, MCHP has also offered covered call opportunities.  With the good earnings news, tomorrow may be a good time to look for covered calls.


DIVERSIFICATION

MCHP, as a small cap. company, provides a little diversification in the computer chip industry.  I like to own more than one stock in industries as big as this.   Intel is a large cap stock.  

Consider owning both of these companies in the income producing portion of your investment portfolio.


TheMoneyMadam