We recently compiled a list of the 10 Best Debt Free Dividend Stocks to Invest in. In this article, we are going to take a look at where Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) stands against the other debt free dividend stocks.
Debt financing is not necessarily a bad thing; its effect is determined by how efficiently it is handled. When used wisely, it can generate strong cash flow and boost shareholder returns. On the other hand, ineffective debt management can undermine a company’s financial health. According to data from S&P Global Market Intelligence, the total debt among US nonfinancial companies with credit ratings from S&P Global Ratings hit a new high in the third quarter. The combined debt for these rated nonfinancial firms grew by approximately 0.5% during the period, reaching $8.453 trillion and surpassing the previous record of $8.431 trillion set in the first quarter. The rise was primarily driven by investment-grade companies—those rated BBB- and above—which saw their total debt climb to $6.628 trillion in the third quarter, up from $6.493 trillion in the previous quarter.
The report further mentioned that debt levels among non-investment-grade companies rose across six sectors while declining in four. Among lower-rated firms, consumer staples companies saw the largest increase in leverage during the quarter, with total debt climbing to $88.80 billion from $58.70 billion in the previous quarter.
Also read: 13 Best Warren Buffett Dividend Stocks To Invest In Right Now
With borrowing costs on the rise, companies are increasingly turning to equity markets as a way to reduce debt. According to Bloomberg data, debt repayment was listed as a purpose for proceeds in over $28 billion worth of IPOs completed in the 12 months leading up to April, marking a 56% increase from the previous year. While bankers initially expected an even greater number of debt-driven stock offerings, many companies had secured favorable borrowing terms during the pandemic, reducing the urgency for such moves. However, asset managers note that as central banks delay interest rate cuts, higher borrowing costs are beginning to take a toll. This may prompt more companies to capitalize on strong equity markets to ease financial risk.
Although many US companies have solid balance sheets, a notable portion of defaults has come from lower-rated firms struggling with negative cash flow, high debt burdens, and limited liquidity. These highly leveraged businesses, often labeled as “zombies,” barely manage to cover their interest payments and remain highly vulnerable to even minor financial pressures. According to an Associated Press analysis, nearly 7,000 publicly traded companies worldwide—including 2,000 in the US—fall into this category. Many of these firms took on substantial debt at low interest rates over the years, only to face mounting pressure as persistent inflation drove borrowing costs to their highest levels in a decade. Instead of using borrowed funds for expansion, hiring, or technological upgrades, a significant portion was allocated to stock buybacks.
Relying on debt to sustain dividend payments is generally viewed negatively, particularly given the practices seen during the 2020 pandemic. During that period, many private companies resorted to dividend recapitalization, borrowing funds to continue distributing dividends. This trend carried over into 2024. By September 30, US companies—including those without private equity backing—had raised a record $70.2 billion in leveraged loans for dividend recapitalizations, according to PitchBook data. This figure exceeds the previous peak of $67.2 billion set in 2021.
Nevertheless, many companies have kept their balance sheets stable, with US firms regularly reaching new highs in dividend payouts each year. Given this, we will take a look at some of the best debt free stocks that pay dividends.
Our Methodology:
To create this list, we first used a screener and identified companies with minimal or no debt. From this pool, we selected those that consistently pay dividends to shareholders and compared their enterprise value (EV) to their market capitalization to gauge which ones are debt-free. We then narrowed down the list by including stocks that had sustainable dividend yields. From that list, we picked 10 companies with the highest number of hedge funds having stakes in them, as per Insider Monkey’s database of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A high-tech production line of robotic arms assembling a semiconductor chip.
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)
Number of Hedge Fund Holders: 19
Market Cap as of December 7: $2.21 billion
Enterprise Value as of December 7: $1.71 billion
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) is a Singapore-based semiconductor manufacturing company that specializes in cutting-edge semiconductors and electronics assembly solutions. The company reported strong earnings in the fourth quarter of 2024. It reported revenue of $166.1 million, which fell by 3% from the same period last year. However, the revenue beat analysts’ estimates by $1.1 million. Moreover, its income from operations of $86.6 million grew by 5,081% on a YoY basis. The company’s net income came in at $81.6 million, up significantly by 778.5 million from a prior year period.
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) highlighted in its earnings call that it expects core-market demand to gradually improve and remains focused on delivering new systems and features within its Ball, Wedge, and Advanced Solutions segments. Over the next few quarters, it anticipates continued market adoption of its unique Fluxless Thermo-Compression (FTC), Vertical Fan-Out (VFO), and emerging battery assembly solutions.
As next-generation memory and logic applications, fueled by artificial intelligence, cloud computing, and connected devices, create demand for new semiconductor packaging, the company’s advanced packaging solutions—such as FTC and VFO—are well-positioned to meet these evolving industry needs in the long term.
Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) demonstrated a solid cash position in the most recent quarter. The company ended the quarter with $538.3 million available in cash and cash equivalents. Its operating cash flow and free cash flow came in at $18.9 million and $8.7 million, respectively. The company offers a quarterly dividend of $0.205 per share and has a dividend yield of 1.99%, as recorded on February 11. KLIC is one of the best dividend stocks on our list as the company has been rewarding shareholders with growing dividends for the past five years.
Overall KLIC ranks 6th on our list of the best debt free dividend stocks to invest in. While we acknowledge the potential for KLIC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KLIC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.