Updated 3/5/25

Applied Materials, Inc. (AMAT) plays a crucial role in the semiconductor industry, supplying the equipment and technology needed to manufacture chips. With semiconductors powering everything from artificial intelligence to electric vehicles, AMAT remains at the heart of innovation.

For investors focused on dividends, the question isn’t just about the company’s growth prospects—it’s whether AMAT is a strong contender for a long-term income portfolio. While it doesn’t boast a high dividend yield, its steady increases and financial strength make it a solid dividend growth stock.

Let’s break down the key factors that make AMAT an interesting option for dividend investors.

Key Dividend Metrics

💰 Dividend Yield: 1.03%
📈 5-Year Dividend Growth: ~11%
🛡️ Payout Ratio: 19.87%
🚀 Recent Dividend Increase: Consistent annual raises
📅 Ex-Dividend Date: February 20, 2025
💵 Next Dividend Payment: March 13, 2025
📊 5-Year Average Yield: 0.90%

Dividend Overview

AMAT may not offer a sky-high yield, but what it does provide is consistency. With a dividend yield around 1%, this stock isn’t for those seeking immediate income. Instead, it’s for investors who value growth and sustainability.

The company’s payout ratio sits below 20%, meaning it only pays out a fraction of its earnings in dividends. That’s a good sign—it suggests there’s plenty of room for increases in the years ahead. AMAT has been committed to raising its dividend annually, rewarding shareholders with steady growth even during industry downturns.

For investors looking at long-term compounding, this stock offers a balance between capital appreciation and rising income.

Dividend Growth and Safety

Dividend Growth Potential

One of AMAT’s biggest strengths is its ability to grow dividends at an impressive pace. Over the past five years, the company has increased its dividend at an average annual rate of about 11%. That’s well above inflation and ensures that long-term investors see meaningful income growth.

Unlike some companies that pay high dividends but struggle to sustain them, AMAT’s low payout ratio gives it the flexibility to continue raising dividends, even if earnings dip during industry downturns.

Is the Dividend Secure?

A strong dividend is only as good as a company’s ability to maintain it. AMAT checks the right boxes:

• A payout ratio under 20% ensures dividends remain sustainable even in weaker economic conditions.
• Free cash flow of $3.83 billion provides plenty of liquidity to cover dividends and reinvest in growth.
• A healthy balance sheet with $8.21 billion in cash and manageable debt levels reinforces financial stability.

These factors make AMAT’s dividend not just stable, but well-positioned for continued growth.

Chart Analysis

The chart for Applied Materials (AMAT) reveals a clear downtrend that has been in place for several months. After reaching a peak around mid-2024, the stock has been steadily declining, breaking through key support levels along the way. The price is currently trading well below both the 50-day (orange line) and 200-day (blue line) moving averages, a classic bearish signal that suggests overall weakness in momentum.

The death cross, where the 50-day moving average crosses below the 200-day moving average, occurred months ago and has been followed by continued downward pressure. This is typically seen as a longer-term bearish indicator, as it signals that recent price action has been weaker than the historical trend.

Volume activity shows increasing sell-side pressure, particularly in the last few months. Several spikes in volume coincide with sharp downward moves, which suggests that institutional selling may be contributing to the decline. This isn’t a great sign for short-term stability, as it indicates that larger players may still be offloading shares.

Relative Strength Index (RSI) is sitting at 69.29, hovering just below overbought territory. While this suggests the stock has bounced slightly off its recent lows, the broader trend remains weak. If RSI starts pushing back toward the 70 level, it could indicate a short-term relief rally, but sustained strength would be needed to reverse the downtrend.

Recent price action shows a brief consolidation around the $155 level after a steep drop. The last few candles display some signs of stabilization, but there isn’t strong evidence yet of a major reversal. A key level to watch would be whether AMAT can reclaim its 50-day moving average, which is currently trending downward. If the stock fails to regain this level, it could signal further downside.

Overall, the technical setup reflects a stock that remains in a clear downtrend, with weak momentum and ongoing selling pressure.

Analyst Ratings

Applied Materials (AMAT) has recently experienced a mix of analyst upgrades and downgrades, reflecting diverse perspectives on the company’s future performance.

Upgrades:

• KeyBanc Capital Markets: In January 2025, KeyBanc upgraded AMAT from “Sector Weight” to “Overweight,” assigning a price target of $225. This positive outlook was driven by expectations of growth in artificial intelligence applications and a potential recovery in mobile and server markets.
• Bernstein: On March 5, 2025, Bernstein analyst Stacy Rasgon maintained a “Buy” rating on AMAT with a price target of $210, indicating continued confidence in the company’s strategic direction and market position.

Downgrades:

• Morgan Stanley: In December 2024, analyst Joseph Moore downgraded AMAT from “Equal-Weight” to “Underweight,” reducing the price target from $179 to $164. Moore cited anticipated challenges in the dynamic random access memory (DRAM) market, including higher product prices and longer device lifespans, which have suppressed demand for DRAM-dependent products like personal computers and smartphones.
• Barclays: In January 2025, Barclays reduced its price target for AMAT from $225 to $200, maintaining an “Equalweight” rating. This adjustment reflects a more cautious stance on the company’s near-term prospects.

Consensus Price Target:

As of March 6, 2025, the consensus among 22 analysts is a “Moderate Buy” rating for AMAT, with an average 12-month price target of $215.38. This suggests an anticipated upside of approximately 25% from the current stock price.

These varied analyst opinions underscore the dynamic nature of the semiconductor industry and the differing views on AMAT’s ability to navigate current market challenges and opportunities.

Earning Report Summary

Applied Materials kicked off its fiscal 2025 with a solid earnings report, showing resilience in a tough market. The company brought in $7.17 billion in revenue for the first quarter, up about 7% from last year. That’s a strong sign that demand for semiconductor manufacturing equipment is still holding up, even as the industry faces some headwinds.

On the earnings front, profits looked even better. Adjusted earnings per share came in at $2.38, which not only beat expectations but also showed a 12% increase compared to the previous year. That kind of growth speaks to the company’s ability to manage costs and keep margins strong despite some economic uncertainties.

Looking ahead, though, Applied Materials is being a little more cautious. The company expects second-quarter earnings to land around $2.30 per share, with revenue projected at about $7.1 billion. That’s slightly lower than what analysts were hoping for, and it’s likely one of the reasons the stock has been under some pressure lately.

A big part of this cautious outlook comes from the ongoing trade restrictions with China. The U.S. government has tightened regulations on semiconductor equipment exports, and that’s expected to take a $400 million bite out of Applied Materials’ revenue this year. China has long been a key market, making up 31% of the company’s total sales last quarter—down from 45% the previous year. Clearly, these restrictions are having an impact.

Despite those challenges, the company is staying focused on innovation. Applied Materials is doubling down on technology that supports energy-efficient computing, particularly for artificial intelligence. Given how much demand is growing in that space, this could be a key driver for the company moving forward.

All in all, the latest earnings report was strong, but there are some hurdles ahead. Revenue and profit growth are impressive, but trade issues and tighter regulations could make the next few quarters a bit more unpredictable. That said, Applied Materials has proven its ability to adapt before, and its focus on cutting-edge tech could help it navigate whatever comes next.

Financial Health and Stability

For dividend investors, a company’s financial foundation is just as important as its payout history. AMAT’s revenue over the past year reached $27.63 billion, with a respectable 6.8% year-over-year growth.

Profitability remains strong, with a net income of $6.34 billion and a profit margin of nearly 23%. Return on equity is particularly impressive at 35.19%, showing how efficiently the company turns its investments into profits.

The current ratio of 2.67 is another positive sign—it means AMAT has more than enough short-term assets to cover liabilities, reducing financial risk. For investors looking for a stable dividend stock, these are encouraging numbers.

Valuation and Stock Performance

AMAT’s stock has faced some pressure recently, trading at $155.32—well below its 52-week high of $255.89. While volatility is expected in the semiconductor sector, its valuation suggests it may be at an attractive entry point.

The stock’s price-to-earnings ratio sits at 20.30 (trailing) and 16.69 (forward), making it reasonably valued compared to its earnings growth. The price-to-sales ratio of 4.66 also indicates a fair valuation relative to revenue.

For long-term investors, temporary stock price fluctuations can create opportunities. Given AMAT’s history of growth and strong financials, this dip could be a chance to accumulate shares at a more reasonable price.

Risks and Considerations

No investment comes without risks, and AMAT has its fair share of challenges to consider.

• Semiconductor cycles: Demand for chip equipment is highly cyclical. Periods of strong growth are often followed by slowdowns, which can impact earnings.
• Competition and innovation: The semiconductor industry evolves rapidly, and AMAT must continue innovating to stay ahead. Falling behind technologically could hurt its market position.
• Geopolitical uncertainty: Trade tensions, particularly between the U.S. and China, pose a risk. New regulations or restrictions on semiconductor equipment exports could affect revenue.
• Stock volatility: With a beta of 1.62, AMAT is more volatile than the broader market. Investors should expect price swings, especially given the industry’s sensitivity to global demand.

Despite these risks, AMAT has proven its ability to navigate industry challenges and adapt to changing market conditions.

Final Thoughts

Applied Materials isn’t a traditional income stock, but it offers something just as valuable: consistent dividend growth backed by a strong financial foundation.

With a relatively low yield of around 1%, this stock may not appeal to those focused purely on high income. However, its double-digit dividend growth, low payout ratio, and financial health make it an attractive option for investors who prioritize long-term compounding.

For those with a long-term mindset, AMAT provides a mix of capital appreciation and growing income, making it a solid choice for a diversified dividend portfolio.