Texas Instruments Boosts Quarterly Dividend 24% (TXN)
By: Ned Piplovic,
Texas Instruments, Inc. (NASDAQ:TXN) has just rewarded its shareholders with the 15th consecutive annual dividend hike by raising its upcoming quarterly dividend payout by 24.2%.
While avoiding dividend cuts in the past two decades, the company only paid a flat $0.085 annual dividend from 1999 to 2003. As Texas Instruments’ (TI) began transitioning its production to more profitable product lines — which require lower capital investments — the company started generating ore cash flow from operations. Then, the company returned a substantial portion of that additional cash flow to its shareholders through rising dividend distributions and share repurchases. Over the past decade, the company has distributed more than $12 billion as dividends and has repurchased 43% of its outstanding shares since 2004.
For instance, in 2017, TI grew its total annual dividend amount by nearly 30% prior to the current 24% total dividend distribution advance in 2018. The company’s long-term target is to pay out as dividends that range from 40% to 60% of its annual free cash flow (FCF).
After rising steadily and advancing nearly seven-fold following the 2008 financial crisis, the share price reached its five-year high in January 2018. Following the January peak, the share price experienced increased volatility and dipped below the level that it had achieved one year ago by the time the markets closed on October 24, 2018.
Investors who are convinced that the current share price drop is just part of the overall market pullback and a buying opportunity should act quickly. To claim shareholder of record status and eligibility to receive the quarterly dividend distributions on the upcoming November 15, 2018, pay date, investors must take a position prior to the next ex-dividend date on October. 30, 2018.
Texas Instruments, Inc. (NASDAQ:TXN)
Headquartered in Dallas, Texas and founded in 1930, Texas Instruments Incorporated designs, manufactures and sells semiconductors to electronics designers and manufacturers worldwide. The Analog segment offers power products to manage power requirements with battery management solutions, portable components, power supply controls, switches and interfaces, mobile lighting and display products. Additionally, this segment also offers signal chain sensors, integrated products, which primarily are incorporated into personal electronics, industrial and automotive markets. The Embedded Processing segment offers connected microcontrollers and stand-alone wireless connectivity solutions. This segment offers products for use in various markets, mainly industrial and automotive. The company also provides Digital Light Processing (DLP) products, primarily for use in projectors to create high-definition images. In 1958, Texas Instrument’s Jack Kilby invented the integrated circuit, which became the foundation for most of the technology we use today.
Riding the long uptrend, the share price advanced more than 24% at the beginning of the trailing 12-month period. However, after reaching its 52-week high of $119.89 on January 23, 2018, the share price reversed direction and gave back most of those gains to close on October 23, 2018 only 4% higher than it was one year earlier. However, on October 24, 2018, when the Dow Jones Index fell more than 600 points, the TXN stock dropped more than 8% in a single trading session to close at its 52-week low of $92.01, which was 4.6% lower than the price from the beginning of the trailing 12-month period. However, the share price was still nearly 120% higher than it was five years earlier.
The current $0.77 quarterly dividend payout is 24.2% above the $0.62 distribution from the previous period. This new quarterly dividend distributions corresponds to a $3.08 annualized payout and yields 3.3%, which is 45.5% higher than the company’s own five-year average dividend yield of 2.3%. In addition to outperforming the company’s own five-year average, TI’s current yield is nearly three times higher than the 1.16% average yield of the overall Technology sector. Furthermore, the 3.3% current yield is also more than 40% higher than the 2.35% simple average yield of TI’s peers in the Broad Line Semiconductor industry segment.
Since beginning its current streak of 15 consecutive annual dividend hikes, the company enhanced its total annual dividend amount more than 36-fold, which is equivalent to an average annual growth rate of 27% every year since 2004.
Before the significant price drop on October 24, 2018, the company was on track to deliver a 7% total return. However, the sharp share price decline resulted in a total loss of 2% for the year. However the company rewarded long-term investors with an 81% total return over the past three years and more than 175% over the past five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.