Technology Sector Ideas

[gfp927z]

ASML - While ASML's lithography technology -- using light to make patterns on the silicon wafers used in semiconductor chips -- is undeniably complex, its investment thesis is far more straightforward. Do you believe the need for semiconductor chips will grow over the next few decades?

https://www.fool.com/investing/2023/01/28/4-stocks-with-high-dividend-growth-to-buy-in-2023/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article

If you answered yes, ASML's dominant leadership position in its niche might make it a classic buy-and-hold-forever investment. Holding a monopoly with its bleeding-edge extreme ultraviolet (EUV) lithography system and a roughly 80% share of the more mature deep ultraviolet (DUV) market, ASML is of paramount importance to the semiconductor industry.

Thanks to this dominant positioning, the company has averaged a 26% free cash flow (FCF) margin across the last decade. With this incredible cash generation, ASML handsomely rewards its shareholders, as evidenced by its annual dividends skyrocketing 1,600% from its first payment in 2008.

In fact, using the last 12 months' figures, ASML could triple its 0.8% dividend and still have excess free cash flow. Going forward, ASML plans to make quarterly dividend payments, as opposed to their semi-annual payments in the last few years. This is great news for dividend reinvestment plans as they will now receive ASML shares at various price points throughout the year via its quarterly payouts.

As countries weigh becoming more technologically independent, the company's lithography systems should continue to see healthy demand. Trading at 27 times FCF, ASML brings incredible dividend growth potential at a reasonable price.

<<<



---