Updated 3/13/25
Power Integrations might not be a household name for most income investors, but it’s quietly doing something interesting in the tech space—it pays a dividend. That’s not something you often see in this part of the market, where reinvesting every penny into growth is typically the playbook. This California-based company specializes in energy-efficient power conversion chips used in everyday electronics, and while its business may sound niche, its shareholder returns approach deserves attention.
Founded in 1988, the company builds chips that are tucked inside everything from phone chargers to appliances to industrial equipment. Its bread and butter is making power conversion more efficient, which is increasingly vital as the world electrifies. POWI has been through cycles, as all tech names have, but its consistent cash flow and growing dividend make it a company worth watching—especially now that it’s trading well below its highs.
Recent Events
In its latest quarter, Power Integrations reported a 17.6% jump in revenue from the year before. That’s encouraging, especially in a sector still shaking off supply chain headaches and uneven demand. But that good news didn’t carry down to the bottom line. Earnings per share dropped 36% year over year, suggesting that rising costs or margin pressure are still in play.
The stock has had a rough run. It’s down over 20% from this time last year, underperforming the broader market. Currently trading in the mid-$50s, it’s only a few bucks above its 52-week low. It’s not surprising to see investors cautious right now. But with that drawdown comes a yield that’s better than what POWI has historically offered—and that’s where dividend-focused investors might start to take notice.
Key Dividend Metrics
📌 Forward Dividend Yield: 1.53%
💰 Annual Dividend: $0.84 per share
📅 Next Dividend Date: March 31, 2025
🧾 Payout Ratio: 144.64%
📈 5-Year Average Yield: 0.84%
📉 52-Week Price Performance: -21.63%
🧮 Free Cash Flow (TTM): $55.7 million
💳 Cash Balance: $300 million
📊 Total Debt: $15.6 million
Dividend Overview
Let’s be honest—this isn’t a high-yield stock. The 1.5% yield may not raise eyebrows, but it’s a meaningful payout from a tech company, particularly one in a niche industry like this. And when you consider that POWI’s five-year average yield is under 1%, today’s yield looks a lot more appealing in comparison.
Yes, the payout ratio is high. On paper, it’s well above 100%, which usually signals trouble. But context matters. This company has almost no debt and a huge cash pile relative to its size. That kind of financial buffer means it can afford to keep rewarding shareholders even when profits dip.
In other words, the dividend might not be ironclad, but it’s supported by real financial strength. And the fact that management continues to issue these payments, quarter after quarter, shows a level of commitment that shouldn’t be overlooked.
Dividend Growth and Safety
POWI isn’t just paying a dividend—it’s been raising it. Over the last several years, the payout has grown steadily, and more importantly, the company has never had to cut it. That kind of track record counts for a lot when evaluating dividend safety.
While earnings can bounce around in this business, cash flow has been a more reliable story. The company brought in over $80 million in operating cash flow last year and produced more than $55 million in free cash flow. That covers the dividend comfortably, even with the high payout ratio based on earnings.
Sure, the payout isn’t untouchable. But the combination of cash on hand, low debt, and consistent free cash flow gives this dividend a sturdy foundation. For income investors who can stomach a bit of tech-sector volatility, that’s a rare and valuable combination.
Chart Analysis
Current Price Action and Trend Structure
Power Integrations (POWI) has been in a sustained downtrend since early 2024. The chart shows a clear pattern of lower highs and lower lows, a classic sign of a markdown phase. The price is currently trading below both its 50-day and 200-day simple moving averages. The 200-day average is sloping downward consistently, and the 50-day has recently turned back down after attempting to flatten out earlier this year.
After briefly breaking above the 50-day in late February, price quickly reversed, leading to a sharp drop toward the $55 range. This most recent selloff brought the stock right back near its 52-week low, hinting that there’s still underlying weakness and lack of conviction among buyers.
Volume Activity
Looking at volume, there’s been a noticeable uptick on red days recently, particularly in early March. Several down days came with higher-than-average volume, suggesting institutional or programmatic selling. That adds weight to the recent price breakdown and suggests the move wasn’t just retail-driven. On up days, volume hasn’t matched that intensity, which means rallies have been less convincing.
Back in October, there was a sharp spike in volume, but the price failed to hold the breakout—another sign that the bulls haven’t had control for some time.
RSI and Momentum Signals
The Relative Strength Index (RSI) has been trending below the midpoint of 50 for months, remaining mostly in a bearish range. Recently, it dipped near the oversold zone again, which aligns with the sharp downward price action. That said, there hasn’t been any bullish divergence or notable shift in momentum that would indicate a reversal is forming yet.
Every time RSI approaches the 60 level, it gets rejected—confirming this persistent weakness in buying strength. The momentum profile continues to favor sellers.
Short-Term Candle Action
Focusing on the last five candles, the pattern is telling. Three of the five are solid-bodied red candles with minimal lower wicks, which shows strong selling pressure right into the close on those days. One candle shows a long lower wick, suggesting dip buying occurred, but the follow-through was weak. The most recent candle is a small-bodied bar with short wicks on both ends, indicating indecision, but not much effort from buyers to reclaim higher ground.
The short-term outlook remains fragile, and until a meaningful reversal candle forms with high volume confirmation, this downward trend remains intact.
Analyst Ratings
📈 Power Integrations (POWI) has recently received a mixed bag of analyst updates, showing a cautious but slightly optimistic stance from the investment community. The current consensus rating stands at a moderate buy, with analysts placing the average price target at $78.00. That implies a healthy upside of about 41% from where the stock is currently trading around the mid-$50s.
🟢 In February, one firm reaffirmed its buy rating while holding firm on a $78.00 target. The analysts pointed to expected strength in the consumer electronics space, where demand for energy-efficient chips is projected to recover. With Power Integrations supplying components critical to this space, the view was that the company is well-positioned to benefit from a broader rebound in end-market demand.
🟡 On the flip side, another research group shifted its stance from buy to hold earlier this March. That downgrade wasn’t aggressive but reflected concern around soft earnings in recent quarters and the possibility of continued margin compression. With EPS down year-over-year and some volatility in gross margins, caution was warranted in the near term.
📊 The spectrum of ratings underscores the level of uncertainty surrounding the tech hardware space in general, especially companies like POWI that operate at the intersection of consumer trends and industrial demand. Still, the fact that the average price target remains well above the current market price suggests that sentiment hasn’t turned overly bearish—just more measured.
Earning Report Summary
Power Integrations wrapped up 2024 with a mixed bag of results that showed some resilience despite ongoing headwinds. For the fourth quarter, the company brought in $105.2 million in revenue. That’s up 18% from the same period a year ago, though down about 9% from the previous quarter. So, there’s a bit of a push and pull happening—year-over-year growth, but sequential softness.
On the earnings side, the company reported net income of $9.1 million, which breaks down to $0.16 per diluted share. That’s a step down from $0.25 per share last quarter and the same period last year. Non-GAAP earnings, which strip out some of the accounting noise like stock-based comp and amortization, came in at $0.30 per share—also lower than recent quarters but still ahead of Q4 2023.
Looking at the full year, Power Integrations posted $419 million in revenue, slightly below the $444 million it delivered in 2023. Full-year GAAP earnings dropped to $0.56 per share from $0.97 the year before. On a non-GAAP basis, earnings came in at $1.16 per share, down from $1.29. The company still pulled in over $81 million in operating cash flow for the year, which keeps things stable on the financial health front.
Management acknowledged the macro uncertainties still weighing on demand, especially with global trade dynamics in play. But there’s also cautious optimism. They expect growth in areas like renewable energy, metering, appliances, and high-voltage applications. A big part of that optimism comes from their PowiGaN products, which are starting to gain traction in the market.
On the shareholder front, they kept the dividend steady at $0.21 per share in Q4, with another payout already on the schedule for March 31. They also bought back a small chunk of shares—just under $2 million worth—leaving over $48 million still available under their current repurchase plan.
Looking ahead to the first quarter of 2025, the company isn’t expecting much movement in revenue—flat, give or take five percent. Gross margins are expected to hold in the 55% range, with operating expenses staying in check. All in all, Power Integrations ended the year on stable footing, even if growth took a bit of a breather.
Financial Health and Stability
One of the strongest points in Power Integrations’ favor is its balance sheet. The company has nearly $5.30 in cash per share and very little debt. That’s a rare setup in any sector, and even more impressive in tech, where companies often lean heavily on borrowing to fund growth.
Liquidity isn’t a problem here. The current ratio is above 9, which is practically off the charts. That means the company has more than enough short-term assets to cover its liabilities many times over.
Profitability metrics are a little muted right now—return on assets is low at just over 1%, and return on equity sits below 5%. But those figures are being held down by the recent earnings slump. Gross margins are still healthy, and the company has the operational leverage to expand profits quickly once demand picks back up.
Valuation and Stock Performance
At nearly 100 times trailing earnings, POWI doesn’t look cheap by traditional metrics. But this P/E is skewed by temporarily depressed earnings. It’s more useful to look at things like price-to-book, which has come down from nearly 6 to just over 4. That’s a reflection of the stock’s 28% decline from its recent highs.
In short, the company has become more attractively priced—especially relative to its own history. For investors who take a long-term view, this kind of reset can present a decent entry point, particularly when paired with a growing dividend.
Stock performance over the last year hasn’t been pretty. But that drawdown also makes the yield more compelling. The stock is trading near technical support, and while nobody knows the exact bottom, there’s at least a case to be made that the worst may be behind it.
Risks and Considerations
There are a few flags worth keeping in mind. First, the high payout ratio. While it’s backed by cash flow and liquidity, it still suggests that the company is paying out more than it earns right now. If margins don’t recover or cash flow dries up, management could decide to pause or slow dividend growth.
Then there’s the cyclicality of the business itself. Power Integrations is tied to broader demand in consumer electronics, appliances, and industrial equipment. Those markets can swing hard based on macro trends, and that can hit earnings in ways that aren’t always easy to predict.
And of course, competition is always lurking. Efficiency is the name of the game in this space, and staying ahead requires constant investment in R&D. That can pressure margins and slow down returns to shareholders, especially in tougher quarters.
Final Thoughts
Power Integrations isn’t a traditional dividend stock, but that’s what makes it worth a closer look. It offers a modest yield, backed by a rock-solid balance sheet, and has proven it can deliver consistent cash flow even in choppier times.
For income investors who are comfortable straying a bit from the usual suspects, POWI brings something different to the table. It’s a tech company that pays its shareholders—not just in growth potential, but in actual cash.
That blend of resilience, optionality, and shareholder alignment might not be flashy, but it’s exactly what long-term dividend investors should be looking for in today’s market.