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Why Kulicke & Soffa Stock Is Up 14.5% So Far This Week

By Rich Smith – Oct 21, 2021 at 6:16PM

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The company's dividend news excited investors.

What happened

Semiconductor equipment manufacturer Kulicke & Soffa Industries (KLIC -2.97%) has been having a banner week so far, with its shares closing Thursday up 14.5% from last Friday's close. I see two big reasons this stock is registering with investors.

But only one of them is obvious.

Stock up glowing green arrow climbs on a stock screen

Image source: Getty Images.

So what

The obvious reason: On Monday, Kulicke & Soffa announced that it is hiking its quarterly dividend by 21%, to $0.17 per share. Management explained that it can afford the richer dividend because, as outlined at its recent Investor Day, the company sees "a very promising business outlook" for semiconductor manufacturing.

And yet, even with the increase, Kulicke will be paying its shareholders only about $0.68 per year. So while the increase itself is sizable, it still leaves Kulicke stock paying only about a 1.2% dividend yield.

Now what

Is that reason enough for a 14.5% increase in share price? Perhaps not. But now for the less obvious reason:

On Nov. 16, less than one month from now, Kulicke & Soffa is scheduled to report its fourth-quarter and full-year fiscal 2021 financial results. Analysts are forecasting a big improvement over last year's $0.29 quarterly profit. Indeed, they expect a sevenfold increase to $2.03 per share.  

Such bold promises may give investors pause: Can Kulicke really deliver on them?

Yet you have to wonder: Would management be raising its dividend so substantially if things were not going unusually well for Kulicke & Soffa this year? I kind of doubt it. And from that point of view, this week's dividend rate hike can be taken as a sign that come Nov. 16, the company will prove analysts correct and deliver to its investors an earnings payday of potentially epic proportions.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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