Smart Dividend Portfolio Edition #51: Chipping Ahead
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Dear Investor,
Welcome to the 51st edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: March 10, 2025
Stocks rallied on Friday but still closed with steep weekly losses. The Dow Jones Industrial Average (DJIA) declined by 2.37%, while the S&P 500 (SPX) lost 3.10% on the week, its worst showing since September 2024. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) dropped by 3.45% and 3.27%, respectively, ending in correction territory. The DJIA is the only main index still positive year-to-date.
Markets opened sharply lower on Friday, as weaker-than-expected jobs data weighed on sentiment. February payrolls growth missed forecasts, while January’s numbers were revised sharply downward. The unemployment rate unexpectedly inched up to 4.1%, while earnings rose at a slower pace than economists projected.
All in all, February’s report reflected a cooling job market, adding fuel to growing expectations of an economic downturn. Markets have been on a roller-coaster ride in recent weeks, with Trump’s policy flip-flops – particularly on tariffs – hitting consumer and investor sentiment. The President’s decision on Thursday to postpone tariffs on Mexican and Canadian imports covered by the USMCA did little to lift spirits, instead muddying the outlook further.
Stocks rebounded later in the day as Jerome Powell offered a dose of optimism regarding the economy. The Federal Reserve Chair said that the “U.S. economy continues to be in a good place” and monetary policy was “well-positioned to wait for greater clarity.” Just a day earlier, Atlanta Fed President Bostic’s comments that that rates could stay unchanged for longer worked in the opposite direction, adding to downward pressure on stocks.
Thus, the market’s bounce following Powell’s remarks may be a sign that investors aren’t ready to abandon the rally just yet, looking for any reasons to buy the dip. Not long ago, any sign of labor market weakness would have been a bullish signal, reinforcing the Fed’s case for rate cuts, whereas even a hint of a pause in monetary easing would send stocks tumbling.
Powell’s comments calmed the markets, but investors shouldn’t ignore another policymaker’s warning. Fed Governor Lisa Cook cautioned that stocks were “susceptible to large declines” as elevated valuations increase their vulnerability to negative economic news. While overvaluation doesn’t guarantee an imminent crash, it adds to market risks, on top of policy uncertainty and mixed economic data.
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This Week’s Quality Dividend Stock Idea
Lam Research (LRCX) is a leading U.S.-based semiconductor equipment company specializing in designing, manufacturing, and servicing wafer fabrication equipment. Its advanced etch, deposition, and cleaning technologies are critical to producing cutting-edge chips used in consumer electronics, data centers, and automotive applications. LRCX is a key supplier to major semiconductor foundries and memory manufacturers, playing a vital role in the global semiconductor supply chain.
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Innovation-Driven Growth
Founded in 1980 by David K. Lam in Silicon Valley, Lam Research entered the semiconductor industry with its first plasma etching system in 1981. Over the next two decades, the company expanded globally and advanced its etch and deposition technologies, securing a strong foothold in the chip manufacturing ecosystem.
A pivotal moment came in 2012 with the acquisition of Novellus Systems, significantly expanding Lam’s expertise in chemical vapor deposition and electroplating, transforming it into a comprehensive wafer fabrication equipment provider. This positioned the company for accelerated growth as demand for memory and logic devices surged throughout the 2010s.
In the past five years, Lam has focused on strategic acquisitions and technological advancements to strengthen its position in AI, advanced packaging, and next-generation semiconductor manufacturing. In 2022, the buyout of an Austrian wet processing equipment provider, SEMSYSCO, enhanced Lam’s advanced packaging solutions in cleaning and plating—critical for AI and high-performance computing. In the same year, the acquisition of a Texas-based plasma simulation software firm, Esgee Technologies, bolstered modeling and simulation capabilities for next-generation semiconductor processes.
In addition, continued investment in EUV-compatible technologies positioned Lam to support the semiconductor industry’s transition to smaller, more powerful nodes. LRCX has also benefited from AI-driven semiconductor demand, leveraging its expertise in etch, deposition, and cleaning technologies to support advanced chipmaking for data centers, automotive, and high-performance computing applications. While the company faced challenges, such as the 2016 termination of its attempted acquisition of KLA-Tencor due to antitrust concerns, it has continued expanding organically and through targeted acquisitions.
As the semiconductor industry evolves, Lam remains focused on scaling its capabilities, investing in R&D, and expanding its global footprint to meet the growing needs of AI, HPC, and next-generation logic and memory devices. Today, with a market capitalization of ~$98 billion and annual revenues of $16.2 billion, Lam Research is ranked #237 on the Fortune 500 list.
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High-Margin Business Model
The company operates a capital-intensive, high-margin business, supplying wafer fabrication equipment and services to semiconductor manufacturers. It generates revenue through two core segments: Systems and Customer Support & Other. The systems segment accounts for approximately 60% of Lam’s revenue, driven by its advanced etch, deposition, and cleaning technologies essential for manufacturing cutting-edge semiconductors. Demand for its equipment is closely tied to semiconductor capital expenditure cycles, with growth fueled by increasing chip complexity and rising investments in AI, 5G, and high-performance computing.
Customer Support & Other segment provides a recurring revenue stream through spare parts, maintenance, and equipment upgrades, enhancing profitability and cash flow stability. As semiconductor fabs seek to extend the lifespan of existing tools, Lam benefits from long-term service contracts and process enhancements.
Geopolitical shifts and government-backed semiconductor investments, such as the U.S. CHIPS Act, lead to more fab construction, expanding Lam’s addressable market. The increase in fab construction directly correlates with a higher demand for semiconductor manufacturing equipment, which is Lam Research’s primary business.
Lam’s earnings growth is driven by the increasing adoption of 3D NAND, advanced DRAM, and logic chips, which fuel demand for its specialized wafer fabrication equipment. Additionally, Lam is capitalizing on the demand for AI-driven semiconductors through key technology inflections such as gate-all-around (GAA) nodes and advanced packaging. This year, Lam expects shipments to gate-all-around nodes and advanced packaging combined to be well over $3 billion.
Lam consistently invests in cutting-edge technologies to stay ahead of the competition, ensuring its tools meet the evolving demands of AI-driven semiconductor fabrication. In February 2025, Lam Research introduced two breakthrough tools—ALTUS Halo and Akara—to advance AI chip manufacturing. ALTUS Halo incorporates molybdenum-based atomic layer deposition (ALD), enabling precise, low-resistivity metallization that enhances chip performance and power efficiency. Akara, an advanced plasma etch system, is designed for complex 3D chip architectures, supporting next-generation logic and memory scaling. Lam reinforces its leadership in enabling the next wave of computing innovation by addressing critical challenges in AI semiconductor production.
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Solid Growth, Robust Finances
Over the past five years, Lam Research (LRCX) has demonstrated impressive growth, with revenues and earnings expanding at a CAGR of 11.2% and 19.5%, respectively. This momentum reflects the company’s strong execution and sustained industry demand.
LRCX had a tough Fiscal 2024 due to weaker semiconductor manufacturing equipment demand, challenging market conditions, and higher operating expenses. Most of the weakness was concentrated in H1, with earnings growth rebounding towards the year-end.
This strength continued into Fiscal 2025. In FQ2 2025 (ended December 29, 2024), Lam’s revenues surged 16.4% year-over-year to $4.38 billion, exceeding analyst expectations of $4.31 billion. Adjusted EPS of $0.91 also surpassed estimates of $0.88, while the company’s adjusted gross margin stood at 47.5%, and operating income accounted for 30.7% of revenue. Strong execution in both systems and customer support businesses fueled this robust performance.
A notable shift occurred in Lam’s revenue mix, with the memory systems segment contributing 50% of total revenue, up from 35% in the prior quarter. This growth was driven by NAND investments in layer-count upgrades and DRAM technology transitions to 1-alpha, 1-beta, and 1-gamma nodes.
Conversely, foundry and logic revenue declined, accounting for 35% and 15% of total revenue, respectively—a drop of 6% and 9% from the prior quarter. This indicates a temporary pullback in demand from these segments.
Lam is strategically reducing its reliance on China, with the country’s market share dropping to 31% in Q4, down from 37% in the prior quarter. While geopolitical uncertainties persist, the company is positioning itself to navigate export restrictions through technological advancements like Molybdenum-based atomic layer deposition and carbon gapfill. Additionally, Lam is diversifying its supply chain and manufacturing footprint across multiple regions to mitigate risks.
Looking ahead, the company sees 2025 wafer fab equipment (WFE) spending reaching ~$100 billion, up from mid-$90 billion in 2024. With its focus on deposition/etch-intensive inflections (such as GAA and advanced packaging) and continued NAND upgrades, Lam expects to outgrow the broader market.
For FQ3 2025 (March quarter), the company forecasts revenue of $4.65 billion (±$300 million) and adjusted EPS of $1.00 (±$0.10). Analysts anticipate $4.33 billion in revenue and $0.88 EPS, suggesting potential outperformance.
While Lam’s debt-to-equity ratio of 0.57x is nearly twice the industry median of 0.30x, it maintains a strong A- credit rating from S&P Global, indicating low credit risk. Its ROE, ROA, and ROIC also rank among the top 10% in the semiconductor industry, reinforcing its profitability and operational efficiency.
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Consistent Shareholder Value
LRCX remains committed to returning 75% to 100% of free cash flow to shareholders through dividends and share buybacks. In fiscal 2024, the company distributed 98% of its $4 billion FCF.
Lam has built a decade-long track record of dividend growth, making it a “Dividend Contender.” Its current 1.13% dividend yield looks modest compared to other sectors but strongly outpaces the Technology sector average of 0.69%. Having increased its payouts at an annual rate of nearly 16% in the past half-decade, LRCX is expected to continue raising its dividends at a similar pace for years to come. This outlook is supported by Lam’s low payout ratios and financial strength.
In 2024, Lam Research repurchased nearly 34 million shares, leveraging its ongoing $10 billion share buyback program announced last year. With $9.2 billion still available for repurchases, the company continues to enhance shareholder value by returning most or all of its free cash flow.
Despite a ~18% dip over the past year, Lam trades at a slightly higher P/E multiple than the sector median of 25.9x. However, its modest valuation remains near the lower end of peer comparisons, suggesting further upside potential. Wall Street analysts remain bullish, forecasting a 25.7% upside from current levels. Notably, firms like Susquehanna, Morgan Stanley, and Bank of America have raised their price targets, with some projections indicating over 40% growth following Lam’s strong Q2 performance.
In October 2024, Lam executed a 10-for-1 stock split to enhance liquidity and broaden employee stock ownership.
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Investing Takeaway
Lam Research is a dominant force in semiconductor equipment, driven by technological innovation, strategic acquisitions, and strong financials. With double-digit earnings growth, a high-margin business model, and rising demand for wafer fabrication equipment, the company is well-positioned for long-term success. Robust share buybacks, increasing dividends, and supportive industry tailwinds, including the U.S. CHIPS Act, add to its appeal. While the stock has dipped slightly, analysts remain positive, with some projecting over 40% upside. Given its resilient business model and strong execution, Lam Research presents a compelling investment opportunity in the semiconductor space.
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Dividend Investor Portfolio
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Portfolio News
▣ The ex-dividend date for Automatic Data Processing (ADP) is March 14th, with the payment date coming on April 1st.
▣ Amgen (AMGN) has started two critical late-stage trials for its experimental weight loss injection MariTide, bringing it closer to entering the burgeoning obesity market. Amgen’s MariTide, a monthly injectable, aims to rival weekly weight loss drugs from Novo Nordisk and Eli Lilly. As a GLP-1 drug, it helps regulate appetite and blood sugar. Two phase three trials are underway—one in 3,500 overweight or obese individuals without Type 2 diabetes and another in 999 with the condition. Earlier Phase-2 trials of MariTide showed up to 20% weight loss in a year, with no plateau.
▣ BlackRock (BLK) has taken majority stakes in the ports on either side of the Panama Canal in a deal worth $22.8 billion. BlackRock’s acquisition shifts control of Panama Canal ports from Hong Kong-based CK Hutchison to the U.S. BlackRock has gained a 90% stake in Panama Ports Company with Global Infrastructure Partners and Terminal Investment.
Meanwhile, BlackRock’s spot Bitcoin exchange-traded fund has reached its highest level since last November’s U.S. presidential election. The heavy trading volume in the BlackRock Bitcoin ETF (IBIT) comes as cryptocurrency markets remain volatile. In the past week, the price of BlackRock’s Bitcoin ETF has declined alongside that of BTC.
▣ Kroger (KR) saw its stock surge over the past week as it received several price-target upgrades from prominent Wall Street brokerages despite posting mixed results in Q4 2024. While revenue declined by 7.4% year-over-year, slightly missing estimates, adjusted EPS surpassed analyst forecasts. In addition, the company reported an 11% year-over-year increase in digital sales for the quarter, contributing to annual e-commerce revenues exceeding $13 billion. In addition, Kroger announced a $5 billion accelerated share repurchase plan, signaling confidence in its financial health and commitment to enhancing shareholder value. The company initiated guidance for FY 2025 with the expected adjusted EPS of $4.60-4.80 and comparable sales (excluding fuel) to rise in the range of 2% to 3%, at the higher end of Wall Street forecasts.
In other company news, Kroger announced the exit of its Chairman and CEO, Rodney McMullen, after a Board investigation into his personal conduct, which violated Kroger’s ethics policy. Following McMullen’s exit, Ronald Sargent was named interim CEO and Chairman, with Mark Sutton as lead independent director, effective immediately. Analysts and investors alike seem to be unfazed by the management change. The relatively muted market reaction reflects confidence in the company’s underlying business fundamentals. Besides, Ronald Sargent – a long-time board member – is expected to provide stability during this transition period. We are certain that these developments don’t pose any material risk to Kroger’s dividend strategy.
▣ The ex-dividend date for LyondellBasell (LYB) is today, with the payment date scheduled for March 17th. In other company news, LYB plans to expand propylene production capacity at its Channelview Complex near Houston. Construction will start in the third quarter of this year and is likely to be operational by late 2028. The new unit will produce 400K metric tons of propylene annually, employ 750 people during peak construction, and add 25 permanent jobs. It will convert ethylene into propylene to make polypropylene and propylene oxide, key materials used in everyday products like food packaging and medical devices.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.92% | +7.97% | $5,879.93 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Mar 14, 2025 | Apr 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.60 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Mar 07, 2025 | Mar 22, 2025 | 2.56% | $20.84 |
| Bank of Nova Scotia (BNS) | Apr 01, 2025 | Apr 28, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Mar 10, 2025 | Mar 17, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Mar 07, 2025 | Apr 07, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Mar 21, 2025 | Apr 09, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | Mar 06, 2025 | Mar 27, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Mar 21, 2025 | Apr 04, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
