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Texas Instruments to Reward Investors With 13% Dividend Hike

Texas Instruments TXN or TI recently announced a hike in dividend. The company plans to raise quarterly dividend by 12 cents to $1.02 per share. This translates to a 13% increase from the prior dividend of 90 cents.

The new dividend will be paid on Nov 16, 2020 to stockholders of record as of Oct 30, 2020, contingent upon a formal declaration by the board of directors at its regular meeting in October.

Texas Instruments Incorporated Price and Consensus

Texas Instruments Incorporated Price and Consensus

Texas Instruments Incorporated price-consensus-chart | Texas Instruments Incorporated Quote

TI’s Cash position

TI’s strong balance sheet and cash flow provide financial flexibility for dividend hikes, share repurchases and strategic acquisitions.

At the end of second-quarter 2020, its cash and short-term investments totaled $4.9 billion compared with $4.7 billion at the end of the prior quarter. Long-term debt was approximately $6.2 billion, up from $5.5 billion in the first quarter.

The company generated $1.7 billion in cash from operations via spending $130 million on capex, $882 million on share repurchases and $823 million on cash dividends. Free cash flow at second quarter-end was $1.6 billion.

Texas Instruments is one of the few chip-making companies that return a significant amount of cash to investors.

Bottom Line

Texas Instruments is one of the largest suppliers of analog and digital signal processing integrated circuits. The company’s compelling product line-up, increasing differentiation in business and low-cost 300-mm capacity should drive earnings over the long term.

Its margins should continue to expand because of secular strength in auto and industrial markets, a stronger mix of analog as well as embedded processing products, benefits of restructuring actions, and more than 300mm capacity coming online. Moreover, the semiconductor giant is poised to gain from the growing market for Internet of Things.

We believe that the increase in dividend and share buyback indicate that the company is confident about steady cash flow generation. However, increasing competition from Analog Devices, NVIDIA Corporation and Applied Materials remains a concern.

Zacks Rank and Other Stocks to Consider

Texas Instruments currently carries a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader technology sector include Dropbox DBX, Etsy, Inc. ETSY and Intuit Inc. INTU, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Dropbox, Etsy and Intuit is pegged at 34.4%, 28.5% and 12.3%, respectively.

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