Down 33%, Is This Hidden Dividend Growth Stock a Buy?

Dutch semiconductor powerhouse ASML Holding (NASDAQ:ASML) is the world’s leading supplier of extreme ultraviolet (EUV) lithography systems, critical for manufacturing advanced microchips powering AI, smartphones, and automotive technologies. Holding a near-monopoly on EUV equipment, ASML partners with industry giants like Taiwan Semiconductor Manufacturing (NYSE:TSM), Intel (NASDAQ:INTC), and Samsung, securing its pivotal role in the $600 […] The post Down 33%, Is This Hidden Dividend Growth Stock a Buy? appeared first on 24/7 Wall St..

Jun 4, 2025 - 15:36

Down 33%, Is This Hidden Dividend Growth Stock a Buy?

Key Points in This Article:

ASML Holding (ASML) monopolizes EUV lithography systems, critical for advanced chipmaking, serving key semiconductor industry clients.
Despite a 33% drop from its 52-week high, ASML’s 20% projected 2025 revenue growth and AI-driven demand signal strong recovery potential.
ASML’s 4.9% dividend increase, with a 21% five-year growth rate, marks it as an underappreciated dividend growth stock.
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Dutch semiconductor powerhouse ASML Holding (NASDAQ:ASML) is the world’s leading supplier of extreme ultraviolet (EUV) lithography systems, critical for manufacturing advanced microchips powering AI, smartphones, and automotive technologies. Holding a near-monopoly on EUV equipment, ASML partners with industry giants like Taiwan Semiconductor Manufacturing (NYSE:TSM), Intel (NASDAQ:INTC), and Samsung, securing its pivotal role in the $600 billion chip supply chain.

Its cutting-edge high-NA EUV systems enable the production of smaller, more efficient chips, solidifying its market leadership. Yet, ASML’s stock, currently at $747, has fallen 33% from its 52-week high of $1,110 last July, pressured by U.S.-China export restrictions and a sluggish non-AI chip market.

Despite this dip, ASML’s technological edge and strategic positioning suggest robust potential. Not only does ASML have significant growth potential and numerous catalysts for future gains, but it is an underappreciated dividend growth stock, underscored by its recent payout hike.

Standing On the Shoulders of Giants

ASML stands as a cornerstone of the semiconductor industry, poised for significant growth in 2025 and beyond despite the stock’s recent decline. The semi equipment company projects 2025 net sales of $34.2 billion to $39.9 billion, a 20% increase at the midpoint from 2024’s $32.2 billion, propelled by surging AI chip demand and a rebound in logic and memory markets.

Its high-NA EUV systems, priced at $400 million, are expected to enable advanced chip production at nodes below 2 nanometer, with TSM and Intel set to adopt them by 2027, driving gross margins to 51% to 53%. ASML’s strong order backlog and robust free cash flow support expansions, including a $2.3 billion facility in the Netherlands and training centers in Arizona and Taiwan.

Key growth catalysts include potential easing of U.S.-China export controls, rising consumer electronics demand (smartphone sales are projected to rise 2.3% globally in 2025), and ongoing automotive electrification, with ASML targeting a $1 trillion semiconductor market by 2030.

Risky Business Still

Geopolitical risks remain, such as China-Taiwan tensions and cyclical chip demand volatility, which pose challenges, but ASML’s Europe-based operations minimize tariff impacts, and its 17% revenue compound annual growth rate since 2019 reflects the sort of resilience it possesses.

Even so, ASML’s net bookings of $4.47 billion fell short of analyst estimates of $4.89 billion, reflecting customer hesitancy amid U.S.-China trade tensions and a softer non-AI chip market. And although most tariffs beyond a 10% baseline have been temporarily delayed (semiconductors, so far, remain exempt), threats still loom. Potential U.S. duties on semiconductor equipment and parts could increase costs, though ASML’s European base limits direct exposure. CEO Christophe Fouquet noted tariffs add “new uncertainty” for demand, but the company plans to pass costs to clients.

Further, a U.S. Commerce Dept. probe into semiconductor technology imports was launched to assess national security risks, which could further complicate ASML’s U.S. supply chain, especially for high-NA EUV systems. Despite these headwinds, though, ASML’s backlog and market share should provide a buffer, particularly with AI-driven orders serving as counterweights to short-term challenges.

Wall Street maintains its $909 per share consensus one-year price target on ASML stock, implying 21% upside, with 40 analysts covering ASML and rating it a buy.

Income and Growth In One Package

ASML’s dividend growth, often overshadowed by its tech prominence, is a hidden gem. While celebrated for EUV innovation, its 23% 10-year dividend growth rate and 18% five-year rate fly under the radar. In April, ASML raised its payout by 4.9% to 6.40 euros per share, with a final 1.84 euro payout approved, which yields about 1%. The low 30% payout ratio ensures it is sustainable with plenty of room for future growth. ASML also has a 12 billion euro ($13.7 billion at current exchange rates) buyback program in place.

Unlike some of its high-yield tech peers, ASML’s modest yield prioritizes R&D investment, fueling advancements like immersion lithography and AI-optimized systems.

Strategic partnerships, such as with Nvidia (NASDAQ:NVDA) for AI chip enablement, and as the sole supplier of EUV lithography systems, it holds a 100% market share in this segment, bolstering its long-term edge

For investors looking for a solid, long-term holding for their portfolio, ASML offers a rare blend of capital appreciation and reliable, growing income. This makes the equipment maker a tech-dividend hybrid well-positioned to capitalize on the semiconductor boom in a volatile market.

The post Down 33%, Is This Hidden Dividend Growth Stock a Buy? appeared first on 24/7 Wall St..