Taiwan Semiconductor Manufacturing Co Ltd’s Dividend Analysis

Understanding TSM’s Dividend Prospects and Financial Health

Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) recently announced a dividend of $0.54 per share, payable on 2024-04-11, with the ex-dividend date set for 2024-03-18. As investors look forward to this upcoming payment, the spotlight also shines on the company’s dividend history, yield, and growth rates. Using the data from GuruFocus, let’s look into Taiwan Semiconductor Manufacturing Co Ltd’s dividend performance and assess its sustainability.

What Does Taiwan Semiconductor Manufacturing Co Ltd Do?

Taiwan Semiconductor Manufacturing Co. is the world’s largest dedicated chip foundry, with almost 60% market share. TSMC was founded in 1987 as a joint venture of Philips, the government of Taiwan, and private investors. It went public as an ADR in the US in 1997. TSMC’s scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business. Furthermore, the shift to the fabless business model has created tailwinds for TSMC. The foundry leader has an illustrious customer base, including Apple, AMD, and Nvidia, that looks to apply cutting-edge process technologies to its semiconductor designs. TSMC employs more than 73,000 people.

A Glimpse at Taiwan Semiconductor Manufacturing Co Ltd’s Dividend History

Taiwan Semiconductor Manufacturing Co Ltd has maintained a consistent dividend payment record since 2016. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

Breaking Down Taiwan Semiconductor Manufacturing Co Ltd’s Dividend Yield and Growth

As of today, Taiwan Semiconductor Manufacturing Co Ltd currently has a 12-month trailing dividend yield of 1.34% and a 12-month forward dividend yield of 1.49%. This suggests an expectation of increased dividend payments over the next 12 months.

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Taiwan Semiconductor Manufacturing Co Ltd’s dividend yield of 1.34% is close to a 10-year low and underperforms than 51.88% of global competitors in the Semiconductors industry, suggesting that the company’s dividend yield may not be a compelling proposition for income investors.

Over the past three years, Taiwan Semiconductor Manufacturing Co Ltd’s annual dividend growth rate was 4.80%. Extended to a five-year horizon, this rate decreased to 4.30% per year. And over the past decade, Taiwan Semiconductor Manufacturing Co Ltd’s annual dividends per share growth rate stands at an impressive 15.70%.

Based on Taiwan Semiconductor Manufacturing Co Ltd’s dividend yield and five-year growth rate, the 5-year yield on cost of Taiwan Semiconductor Manufacturing Co Ltd stock as of today is approximately 1.65%.

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company’s payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Taiwan Semiconductor Manufacturing Co Ltd’s dividend payout ratio is 0.35.

Taiwan Semiconductor Manufacturing Co Ltd’s profitability rank, offers an understanding of the company’s earnings prowess relative to its peers. GuruFocus ranks Taiwan Semiconductor Manufacturing Co Ltd’s profitability 10 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Taiwan Semiconductor Manufacturing Co Ltd’s growth rank of 10 out of 10 suggests that the company’s growth trajectory is good relative to its competitors.

Revenue is the lifeblood of any company, and Taiwan Semiconductor Manufacturing Co Ltd’s revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Taiwan Semiconductor Manufacturing Co Ltd’s revenue has increased by approximately 17.30% per year on average, a rate that outperforms approximately 66.48% of global competitors.

The company’s 3-year EPS growth rate showcases its ability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Taiwan Semiconductor Manufacturing Co Ltd’s earnings increased by approximately 18.30% per year on average, a rate that outperforms approximately 49.93% of global competitors.

Lastly, the company’s 5-year EBITDA growth rate of 23.50%, which outperforms approximately 61.17% of global competitors.

Engaging Conclusion: Dividend Viability and Investor Considerations

As we conclude our analysis, it’s clear that Taiwan Semiconductor Manufacturing Co Ltd stands as a formidable player in the semiconductor industry with a solid track record of dividend payments and robust growth indicators. The company’s prudent payout ratio coupled with high profitability and growth ranks suggest a sustainable dividend policy. Investors should consider these factors alongside industry trends, technological advancements, and the competitive landscape when evaluating Taiwan Semiconductor Manufacturing Co Ltd as a potential addition to their investment portfolios. Will TSM’s dividends continue to be a beacon of reliability in the fluctuating tech sector? That remains a critical question for value investors to ponder.

GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or dive any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.