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Semiconductors, commonly called microchips, enable many items we use on a daily basis to work correctly and efficiently. Around the size of a small coin, we find them within our mobile devices, vehicles, computers, and freezers, to name a few.
As we wade deeper into a more technological world, the demand for chips has exploded, causing many semiconductor-related stocks to gain widespread attention.
Namely, two of the most popular chip stocks have been none other than Advanced Micro Devices (AMD - Free Report) and NVIDIA (NVDA - Free Report) .
Still, in 2022, many semiconductor stocks got beaten down, ending their fantastic runs.
However, several semiconductor stocks have seen their earnings outlook drift higher over the last several months, including Taiwan Semiconductor Manufacturing (TSM - Free Report) , STMicroelectronics (STM - Free Report) , and Power Integrations (POWI - Free Report) .
Below is a chart illustrating the performance of all three stocks over the last year, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s take a closer look at each one.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing is the world’s largest circuit foundry, responsible for supplying chips to tech titans such as Qualcomm (QCOM - Free Report) and Apple (AAPL - Free Report) . Currently, the company sports a Zacks Rank #2 (Buy).
TSM has generated solid free cash flow as of late, reported at roughly $4.6 billion in its latest quarter and reflecting a 16% sequential uptick. As we can see in the chart below, the company’s free cash flow has recovered nicely from 2021 lows.
Image Source: Zacks Investment Research
For those seeking income, TSM has that covered; the company’s annual dividend currently yields approximately 1.9%. Further, the company has been committed to increasingly rewarding its shareholders, growing its payout by more than 10% over the last five years.
Image Source: Zacks Investment Research
STMicroelectronics
STMicroelectronics designs, develops, manufactures, and markets a broad range of semiconductor integrated circuits and discrete devices used in microelectronic applications. Currently, STM boasts a Zacks Rank #1 (Strong Buy).
STM is no stranger to exceeding quarterly estimates, exceeding top and bottom line expectations in four consecutive quarters. Additionally, it’s worth highlighting that all its last four EPS beats have been by at least 11%.
Image Source: Zacks Investment Research
STM pays a small dividend, currently yielding a modest 0.5% and below its Zacks Computer and Technology sector average. The company pays out just 6% of its earnings.
Image Source: Zacks Investment Research
Power Integrations Inc.
Power Integrations is a supplier of high-performance electronic components used in high-voltage power-conversion systems. POWI sports a Zacks Rank #2 (Buy).
The company rewards its shareholders via its annual dividend that currently yields 1%, nearly precisely in line with its Zacks Computer and Technology sector average.
Impressively, POWI has upped its dividend payout eight times over the last five years, translating to a 22% five-year annualized growth rate.
Image Source: Zacks Investment Research
And for the cherry on top, POWI shares have been consistently strong, up a solid 90% over the last five years and widely outperforming relative to the S&P 500.
Image Source: Zacks Investment Research
Bottom Line
While it’s been a rough past year to own chip stocks, the near-term outlook for all three stocks above – Taiwan Semiconductor Manufacturing (TSM - Free Report) , STMicroelectronics (STM - Free Report) , and Power Integrations (POWI - Free Report) – have drifted higher, undoubtedly a positive development.
In addition, valuations have been slashed across nearly all chip stocks, indicating that the worst could be in the rearview mirror.
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3 Top Chip Stocks Paying Dividends
Semiconductors, commonly called microchips, enable many items we use on a daily basis to work correctly and efficiently. Around the size of a small coin, we find them within our mobile devices, vehicles, computers, and freezers, to name a few.
As we wade deeper into a more technological world, the demand for chips has exploded, causing many semiconductor-related stocks to gain widespread attention.
Namely, two of the most popular chip stocks have been none other than Advanced Micro Devices (AMD - Free Report) and NVIDIA (NVDA - Free Report) .
Still, in 2022, many semiconductor stocks got beaten down, ending their fantastic runs.
However, several semiconductor stocks have seen their earnings outlook drift higher over the last several months, including Taiwan Semiconductor Manufacturing (TSM - Free Report) , STMicroelectronics (STM - Free Report) , and Power Integrations (POWI - Free Report) .
Below is a chart illustrating the performance of all three stocks over the last year, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Let’s take a closer look at each one.
Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing is the world’s largest circuit foundry, responsible for supplying chips to tech titans such as Qualcomm (QCOM - Free Report) and Apple (AAPL - Free Report) . Currently, the company sports a Zacks Rank #2 (Buy).
TSM has generated solid free cash flow as of late, reported at roughly $4.6 billion in its latest quarter and reflecting a 16% sequential uptick. As we can see in the chart below, the company’s free cash flow has recovered nicely from 2021 lows.
Image Source: Zacks Investment Research
For those seeking income, TSM has that covered; the company’s annual dividend currently yields approximately 1.9%. Further, the company has been committed to increasingly rewarding its shareholders, growing its payout by more than 10% over the last five years.
Image Source: Zacks Investment Research
STMicroelectronics
STMicroelectronics designs, develops, manufactures, and markets a broad range of semiconductor integrated circuits and discrete devices used in microelectronic applications. Currently, STM boasts a Zacks Rank #1 (Strong Buy).
STM is no stranger to exceeding quarterly estimates, exceeding top and bottom line expectations in four consecutive quarters. Additionally, it’s worth highlighting that all its last four EPS beats have been by at least 11%.
Image Source: Zacks Investment Research
STM pays a small dividend, currently yielding a modest 0.5% and below its Zacks Computer and Technology sector average. The company pays out just 6% of its earnings.
Image Source: Zacks Investment Research
Power Integrations Inc.
Power Integrations is a supplier of high-performance electronic components used in high-voltage power-conversion systems. POWI sports a Zacks Rank #2 (Buy).
The company rewards its shareholders via its annual dividend that currently yields 1%, nearly precisely in line with its Zacks Computer and Technology sector average.
Impressively, POWI has upped its dividend payout eight times over the last five years, translating to a 22% five-year annualized growth rate.
Image Source: Zacks Investment Research
And for the cherry on top, POWI shares have been consistently strong, up a solid 90% over the last five years and widely outperforming relative to the S&P 500.
Image Source: Zacks Investment Research
Bottom Line
While it’s been a rough past year to own chip stocks, the near-term outlook for all three stocks above – Taiwan Semiconductor Manufacturing (TSM - Free Report) , STMicroelectronics (STM - Free Report) , and Power Integrations (POWI - Free Report) – have drifted higher, undoubtedly a positive development.
In addition, valuations have been slashed across nearly all chip stocks, indicating that the worst could be in the rearview mirror.