Last Update 3/10/25

KLA Corporation (KLAC) plays a crucial role in the semiconductor industry, specializing in process control and yield management. Simply put, the company helps chipmakers improve efficiency and boost production quality—an essential service in today’s tech-driven world.

For dividend investors, KLAC presents an interesting case. It’s not your typical high-yield stock, but what it lacks in immediate income, it makes up for with steady dividend growth, strong financials, and a business model that thrives on technological advancements. If you’re focused on building a long-term, growing income stream, KLAC has some appealing qualities.

Key Dividend Metrics

🤑 Dividend Yield: 1.00%
💵 Annual Dividend: $6.80 per share
📈 5-Year Average Yield: 1.16%
📊 Payout Ratio: 25.46% (a comfortable level)
📅 Ex-Dividend Date: February 24, 2025
🎯 Dividend Growth Rate: Strong, with consistent increases

Dividend Overview

At first glance, KLAC’s dividend yield of 1.00% might seem underwhelming, especially when compared to classic income stocks. But this company’s strength isn’t in how much cash it hands out today—it’s in how fast that payout has been rising over time.

KLAC has been steadily increasing its dividend for years, rewarding long-term investors with higher income year after year. The payout ratio sits at a low 25.46%, meaning the company only uses a fraction of its profits to pay dividends. That leaves plenty of room for continued increases, even if the business hits a rough patch.

This kind of steady, disciplined dividend growth can be a great fit for investors who are in it for the long haul, especially those looking for reliable, inflation-beating income.

Dividend Growth and Safety

KLAC has built a reputation for consistently raising dividends, which is a big deal for income investors. Many companies start strong but struggle to maintain increases. KLAC, however, has been delivering reliable growth, signaling confidence from management.

The low payout ratio is one of the strongest indicators of dividend safety. Since the company only pays out about a quarter of its earnings in dividends, there’s little risk of a cut—even if profits dip.

Another key factor is cash flow. KLAC generates a significant amount of cash, bringing in $3.65 billion from operations over the past year. With $2.47 billion in free cash flow, the company has more than enough flexibility to keep rewarding shareholders.

The only real concern is KLAC’s debt load. It carries $6.07 billion in total debt, pushing its debt-to-equity ratio to 169.41%. That’s higher than many dividend-paying stocks, so while the company can comfortably cover its obligations now, rising interest rates or economic slowdowns could put some pressure on future dividend increases.

Chart Analysis

The stock chart for KLA Corporation (KLAC) provides a lot of insight into the current trend and momentum of the stock. Looking at the price action, moving averages, volume, and relative strength index (RSI), we can gauge the overall market sentiment and potential future movement.

Moving Averages and Trend

The two key moving averages plotted on this chart are the 50-day simple moving average (SMA) and the 200-day SMA. The 50-day SMA is currently hovering around the price action, showing some short-term fluctuations, while the 200-day SMA remains below, reflecting the longer-term trend.

Earlier in the chart, KLAC was in a strong uptrend, as seen by the sharp incline in price from mid-year. However, as the months progressed, the stock experienced a significant pullback, and the 50-day SMA crossed below the 200-day SMA, signaling a death cross—a bearish technical event that often suggests a downtrend. More recently, KLAC has been attempting a recovery, trading close to both moving averages.

At present, the stock appears to be consolidating just around the 50-day SMA, while the 200-day SMA is acting as resistance. A sustained move above both moving averages could indicate renewed bullish momentum, whereas rejection from these levels could lead to further weakness.

Price Action and Volume

KLAC’s price movement has shown significant volatility over the past year. The stock reached a high near 900 before experiencing a sharp decline. The recent price action shows an attempt at stabilization, with some sideways movement and smaller price swings compared to the previous sharp declines.

Volume activity suggests that interest in the stock remains strong. Notably, during periods of sharp upward movements, volume spikes were evident, suggesting strong buying pressure. On the other hand, when the stock pulled back, volume increased as well, indicating that selling pressure was significant.

In recent weeks, volume appears to have normalized, suggesting that neither bulls nor bears are in full control. If volume increases on an upward breakout, that could be a sign of strength, while rising volume on a breakdown would confirm further downside risk.

Relative Strength Index (RSI)

The RSI at the bottom of the chart gives insight into whether the stock is overbought or oversold. Throughout most of the chart, the RSI has fluctuated within a moderate range, occasionally reaching overbought territory before pullbacks.

More recently, the RSI is hovering near the middle of its range, which suggests that KLAC is neither overbought nor oversold at this point. This neutral reading indicates that the next major move could depend on external factors, such as earnings reports, broader market trends, or news catalysts.

If RSI moves above 70, it could signal that the stock is overbought and due for a correction. If it dips below 30, it would suggest that selling pressure has pushed the stock into oversold territory, potentially leading to a bounce.

Recent Candlestick Action

The last few candlesticks show some mixed signals. The stock has been attempting to push higher, but wicks on the upper ends of some candles indicate selling pressure at higher levels. This suggests that while buyers are stepping in, they are facing resistance.

On the downside, there have been relatively few long lower wicks, which means that sellers haven’t been completely dominating. If a strong bullish candle forms with a close above the moving averages, it could be a sign that buyers are regaining control.

For now, KLAC seems to be in a key decision-making zone. Traders and investors will likely be watching to see whether it can reclaim its moving averages or if further downside is in store.

Analyst Ratings

KLA Corporation (KLAC) has recently seen a mix of upgrades and downgrades from analysts, reflecting differing views on its future prospects. While some see strong upside potential due to the company’s market position and financial strength, others are more cautious about industry headwinds.

🟢 Upgrades

📈 Oppenheimer – Upgraded KLAC from “Perform” to “Outperform” with a new price target of $850. Analysts cited the company’s strong financial performance and leadership in semiconductor equipment as key reasons for the upgrade.

💡 Needham & Co. – Moved KLAC to a “Buy” rating with a price target of $750. The upgrade was based on consistent earnings growth and effective cost management, which are helping the company navigate market fluctuations.

🔴 Downgrades

📉 Susquehanna – Downgraded KLAC and adjusted the price target from $640 to $675. Analysts expressed concerns over potential cyclical slowdowns in semiconductor demand, which could impact revenue growth in the near term.

⚠️ Barclays – Maintained an “Equalweight” rating but lowered the price target from $750 to $700. The firm highlighted concerns over rising competition and possible margin pressures as key factors for the adjustment.

📊 Consensus Price Target

The average price target among 27 analysts currently stands at $820.97, with projections ranging from $655 to $950. While most analysts remain positive on KLAC’s long-term prospects, they are also keeping an eye on broader industry trends and macroeconomic factors that could influence future performance.

Earning Report Summary

KLA Corporation recently reported its latest earnings, and overall, the numbers paint a solid picture of a company that continues to perform well in a competitive industry. Revenue for the quarter came in at $3.08 billion, landing at the higher end of expectations. That’s a strong showing, especially considering the challenges in the broader semiconductor market.

Profitability remained impressive, with net income reaching $824.5 million. That translated to earnings per share of $6.16 on a GAAP basis. There was a one-time charge of $239.1 million related to goodwill and intangible assets, which impacted reported earnings. Without that adjustment, the company’s non-GAAP earnings per share stood at $8.20, which was also at the high end of guidance. This shows that KLA continues to generate strong profits even with some one-time accounting adjustments.

Looking ahead, the company expects revenue to be around $3 billion next quarter, with a possible variance of $150 million. Gross margins are projected to stay strong as well, coming in at approximately 60.6% on a GAAP basis and around 62% on a non-GAAP basis. These numbers suggest that KLA is maintaining solid profitability even as market conditions shift.

Shareholders also got good news, as KLA’s Board of Directors approved a quarterly dividend of $1.70 per share. The company has consistently rewarded investors with dividends, showing confidence in its long-term financial health.

All in all, this earnings report reinforces KLA’s strong position in the semiconductor equipment space. The company is hitting its revenue targets, keeping its margins healthy, and continuing to prioritize shareholder returns. With its steady financial performance and focus on innovation, KLA looks well-positioned to navigate whatever comes next in the industry.

Financial Health and Stability

A company’s ability to sustain and grow its dividend ultimately depends on its financial strength. KLAC’s numbers show a business that is well-managed and highly profitable.

Profitability is a major plus. With an operating margin of 40.37% and a profit margin of 29.58%, KLAC is able to generate strong earnings on every dollar of revenue. It also boasts a return on equity of 96.81%, which is exceptionally high, suggesting that the company is using its resources efficiently to generate returns for investors.

Revenue has been growing at a healthy pace, up 23.7% year over year, while earnings have surged 41.5%. Those are strong numbers, especially in an industry that tends to be cyclical.

Debt is the main sticking point. KLAC’s debt-to-equity ratio is on the higher side, meaning the company is more leveraged than some dividend investors might prefer. That said, its strong cash flow and current ratio of 2.36 suggest that it has no immediate financial stress.

For long-term investors, KLAC looks financially sound. As long as revenue keeps growing and management continues balancing debt with profitability, the company should be able to sustain its dividend growth strategy.

Valuation and Stock Performance

From a valuation standpoint, KLAC isn’t exactly cheap, but it’s not wildly overpriced either.

The stock trades at a trailing price-to-earnings ratio of 28.55 and a forward P/E of 20.08. These numbers suggest that investors are paying a premium, but it’s not unreasonable given the company’s growth prospects. The PEG ratio of 1.25 implies that the stock is fairly valued relative to its earnings growth.

One thing to note is that KLAC’s stock price has pulled back recently, trading around $678.36—down from a 52-week high of $896.32. The 50-day and 200-day moving averages are also above the current price, which suggests that the stock has been in a downtrend.

For dividend investors, this pullback could be an opportunity. Buying when prices are lower means locking in a better yield and maximizing long-term returns. That said, investors should be mindful of the semiconductor industry’s volatility before making any decisions.

Risks and Considerations

Like any investment, KLAC comes with risks. The biggest one is that the semiconductor industry is highly cyclical. Demand for semiconductor equipment tends to rise and fall with overall chip production, so KLAC’s revenue can be unpredictable at times.

Another concern is the company’s high debt levels. While KLAC can currently manage its obligations, a prolonged downturn or rising interest rates could create challenges.

Finally, there’s the relatively low dividend yield. At 1.00%, KLAC doesn’t provide the same level of immediate income as some higher-yielding dividend stocks. Investors who need current income may prefer alternatives with higher payouts.

Despite these risks, KLAC’s strong financials and commitment to dividend growth make it an appealing option for long-term investors willing to ride out market cycles.

Final Thoughts

KLAC isn’t a traditional dividend stock, but it offers a compelling mix of steady income growth, strong profitability, and long-term upside. It’s a company that prioritizes returning capital to shareholders while still investing in its own future.

For investors focused on dividend growth rather than high yield, KLAC checks many of the right boxes. Its ability to consistently increase dividends, combined with its solid financial position, makes it a worthwhile consideration for those looking to build long-term wealth.

That said, the company’s reliance on the semiconductor industry’s cycles and its relatively high debt levels are factors to watch. KLAC is best suited for investors with a long-term mindset who are comfortable with some volatility in exchange for strong dividend growth and capital appreciation potential.