Why Lam Research’s Dividend Yield Has Changed over the Years
Lam Research’s revenue and earnings in 2015 and 2016
Lam Research’s (LRCX) revenue rose 14% and 12% in 2015 and 2016, respectively. Revenue from Taiwan, China, and Southeast Asia drove growth in both years. Revenue from Korea, the United States, and Europe rose in 2015 before falling in 2016, and Japan’s revenue fell in 2015 before rising in 2016.
The company’s operating expenses rose 13% and 3% in 2015 and 2016, respectively, and its operating income rose 16% and 36%. Its other expenses rose in both years. Together, these developments translated into EPS (earnings per share) growth of 2% and 41% in 2015 and 2016, respectively. In 2015, EPS were affected by a substantial goodwill impairment charge, and in 2014, they were enhanced by a gain on the sale of assets. Share buybacks also enhanced the company’s EPS.
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Lam Research’s revenue and earnings in 2017
Lam Research’s revenue rose 36% in 2017, driven by Korea, Taiwan, Japan, the United States, and Europe, and offset by China and Southeast Asia. The company’s revenue for the first three months of fiscal 2018 rose 52%, and its operating expenses rose 10% and 14% in 2017 and the first three months of 2018, respectively. Its operating income rose 77% and 119%, and its other expenses fell. Together, these ups and downs translated into 77% and 118% EPS growth in fiscal 2017 and the first three months of fiscal 2018, respectively. The company has maintained a good free cash flow balance.
Lam Research’s dividend yield
Lam Research’s 43% dividend per share growth in 2016 has been followed by 38% growth in 2017. Its stock price has risen 95.9% YTD (year-to-date), compared with 33% growth in 2016, which explains the flatness of the company’s dividend yield curve.
Lam Research versus broad indexes
Lam Research has a PE (price-to-earnings) ratio of 22.4x and dividend yield of 0.9%. The sector’s average PE ratio is 55.5x, and its dividend yield is 0.9%. The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, PE ratio of 22.6x, and YTD return of 15.6%. The Dow Jones Industrial Average (DJIA) (DIA) has a dividend yield of 2.3%, PE ratio of 21.1x, and YTD return of 19.1%. The NASDAQ (COMP-INDEX) (ONEQ) has a PE ratio of 25.3x and YTD return of 25.7%.
The WisdomTree Emerging Markets SmallCap Dividend ETF (DGS), a dividend fund, has 69% and 17% exposure to Asia and technology, respectively. It has a 3% dividend yield and a PE ratio of 13x. Meanwhile, the ProShares S&P 500 Aristocrats ETF (NOBL) has 2% exposure to technology, a 1.9% dividend yield, and a PE ratio of 21x.