Is tsmc a good and reliable dividend stock?

TSMC (TSMC) is not typically considered a high dividend yield stock, with a dividend yield of only 1.17% as of August 16, 2024. Dividend yields this low suggest that the company retains a significant portion of its earnings for reinvestment, which is common for growth-oriented companies like TSMC.

1. Dividend Yield: TSMC's dividend yield is significantly lower than that of Torm (TRMD), which suggests that TSMC is not as reliant on dividends to provide income to its shareholders.
2. Payout Ratio and Free Cash Flow: The payout ratio for TSMC as of June 30, 2024, is 41.72%, which is relatively high. This indicates that a substantial portion of earnings is being distributed to shareholders as dividends. Additionally, TSMC reported a negative free cash flow of $538.35 million, which could be a red flag for the sustainability of future dividend payments.

3. Dividend Continuous and Growth Duration: TSMC has a dividend continuous duration of 20 years and a dividend growth duration of 0 years. The absence of dividend growth in recent years suggests that the company may be prioritizing reinvestment over dividend payments.

4. Financial Health and Interest Coverage: The absence of net interest income data for TSMC makes it difficult to assess the company's interest coverage ratio, which is a measure of its ability to meet interest payments on its debt.
5. Earnings Growth: TSMC's earnings per share (EPS) grew by 30.87% year-on-year as of June 30, 2024, which is a positive sign for the company's profitability and financial health.
6. Revenue Growth: The company's total revenue grew by 34.41%, and net income grew by 30.79% year-on-year as of June 30, 2024, indicating strong business performance.
7. Future R&D Plans: TSMC's commitment to innovation and its role in the semiconductor industry's growth, particularly in AI-related applications, could support continued earnings growth and potentially lead to increased dividend payments in the future.
8. Market Performance: TSMC's stock has delivered impressive gains, outpacing the S&P 500's 10% jump by a wide margin, which suggests strong investor confidence in the company's prospects.

In conclusion, while TSMC is not a high dividend yield stock, it does offer a reliable dividend with a consistent track record. However, the high payout ratio and negative free cash flow suggest that investors should consider the sustainability of TSMC's dividends with caution. The company's strong financial health, earnings growth, and future growth prospects in the semiconductor industry make it a compelling investment overall, but it may not be the best option for income-focused investors primarily seeking dividend payments.