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Texas Instruments Hikes Dividend, to Buy Back $12B Shares

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Texas Instruments (TXN - Free Report) or TI recently announced a hike in dividend along with a share repurchase program.

This time around, the company plans to raise its quarterly dividend by 15 cents to 77 cents per share. This translates into a 24% increase from the prior dividend of 62 cents. The new dividend will be paid on Nov 19, 2018 to stockholders of record as of Oct 31, 2018, contingent upon a formal declaration by the board of directors at its regular meeting in October.

Moreover, Texas Instruments approved a share repurchase program worth $12.0 billion, in addition to approximately $7.4 billion already available.

Notably, Texas Instruments’ shares have rallied 25.8% in the past 12-month period, underperforming its industry’s growth of 32.6%.

 

 

TI’s Cash position

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

The company generated $1.8 billion in cash from operations, spending $249 million on capex, $1.02 billion on share repurchases and $606 million on cash dividends. Free cash flow at the end of the second quarter was $5.7 billion.

Texas Instruments is one of the few chip making companies that returns a significant amount of cash to its 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.

Also, its margins should continue to expand because of the secular strength in the auto and industrial markets, a stronger mix of analog and 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 indicates that the company is confident about its steady cash flows. However, increasing competition from Analog Devices, NVIDIA Corporation and Applied Materials remains a concern.

Zacks Rank and Stocks to Consider

Texas Instruments currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Infineon Technologies AG (IFNNY - Free Report) , ON Semiconductor Corporation (ON - Free Report) and Rambus Inc. (RMBS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Infineon Technologies, ON Semiconductor and Rambus is currently projected to be 7.5%, 13.2% and 10%, respectively.

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