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Analyzing the Dividend Prospects for Advanced Micro Devices Stock

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Aug. 15 2018, Updated 6:31 a.m. ET

Advanced Micro Devices’ dividend growth

In this part of the series, we’ll look at Advanced Micro Devices (AMD). In the previous parts, we looked at Intel (INTC), Nvidia (NVDA), and Qualcomm (QCOM).

Advanced Micro Devices has not declared any dividends in the period we’re covering. The stock has risen 85% in 2018 to date. Let’s investigate the company’s financials to get a sense of its potential dividend-paying ability in the future.

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What’s driving Advanced Micro Devices’ revenue?

Advanced Micro Devices’ revenue grew 46% to $3.4 billion in the first half of 2018. Its Computing and Graphics segment drove growth, followed by the Enterprise, Embedded, and Semi-Custom segment.

What led to positive EPS in H1 2018?

AMD’s gross profit grew 63% in the first half of 2018. The company uses a significant amount of its revenue for R&D (research and development) and marketing, general, and administrative expenses. Its R&D expenses used 21% of its revenue in the first half of 2018. Marketing, general, and administrative expenses consumed 8% of the company’s revenue in the first half of 2018. As a result, the company recorded positive operating income for that period.

That translates to positive EPS for the first half of 2018. Advanced Micro Devices didn’t generate positive free cash flow in the first half of the year.

Projected revenue, EPS, and valuations

Advanced Micro Devices has projected revenue of $6.7 billion, $7.2 billion, and $8 billion for 2018, 2019, and 2020, respectively. Its projected EPS are $0.50, $0.60, and $0.90, respectively, for those years. Higher price gains and EPS growth have translated to projected PE ratios of 42.6x, 31.6x, and 22.8x, respectively, for those same years.

Next, let’s take a look at NXP Semiconductors (NXPI).

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