Summary
- Buoyed by steadily rising chip sales, the semiconductor giant has hiked its dividend 35-fold since 2004.
- Analysts expect the business to grow EPS at a low-teen annual clip thanks to emerging "Internet of Things".
- Secular tailwinds should allow Texas Instruments to join the list of Dividend Aristocrats in 10 years' time.
When income investors look for new opportunities, Texas Instruments (TXN) doesn't often get a mention. That would be a mistake.
Buoyed by rising chip sales, the semiconductor giant has hiked its dividend on 15 occasions since 2004, including a 24% bump announced late last year. The stock has emerged as an income machine over that period, boosting its distribution almost 35-fold.
Yet, despite this impressive track record, Texas Instruments seems to be just getting warmed up. The company looks poised to cash in from the emerging "Internet of Things." And for dividend hunters, that could result in an impressive stream of income.
The Case for Texas Instruments
Admittedly, Texas Instruments may seem like a strange pick for conservative, income investors. Tech firms often plow billions into research and development, hoping to hit it big on the next hot gadget. That doesn't leave much money left over to pay shareholder dividends. And if these companies fall behind the innovation curve, then their share prices can suffer.
Texas Instruments, however, represents an exception. The company makes analog semiconductors - the sensors - that translate real-world information like speed, sound, and temperature into digital signals for computers. These devices, which you can find in everything from cars and televisions to PCs and industrial equipment, are essential for keeping our digital world humming. So, no matter which startup invents the next must-have device or social network, Texas Instruments still makes a profit.
Of course, that doesn't mean a smooth ride for investors. Cycles have long plagued the semiconductor business, driven by the introduction of new products in the dominant end-use markets. Last quarter, a broad industry downturn resulted in a nine percent year-over-year decline in Texas Instruments' sales. President Trump's trade war has also clipped revenues, specifically the government's effective ban on selling equipment to Chinese telecom parts-maker Huawei.
