March 4, 2014, 2:15 P.M. ET
QCOM Dividend, Repurchase Hike: As Analysts Expected
By Teresa Rivas
Analysts are weighing in on Qualcomm’s (QCOM) dividend hike and increased share repurchase plan announced earlier today.
Bernstein Research’s Stacy Rasgon reiterated his Outperform rating on Qualcomm, while also using the news to draw an unflattering parallel to Intel (INTC): “The increase is very consistent with recently-outlined cash return targets ( 75% of FCF, dividend growth earnings growth, and share count reduction). The announcement offers further evidence that goals are genuine, which may help to normalize valuation. In contrast, INTC has not grown their dividend in almost 2 years & has materially cut buybacks as increased spending & stagnating top line have pressured FCF. QCOM has grown FCF materially, exceeding Intel’s for the first time in 2013.”
Cowen & Co.’s Timothy Arcuri reiterated an Outperform rating: “Today’s news is consistent with the company’s November 2013 Analyst Day commitment to return ~75% of total FCF while also growing the dividend faster than EPS growth. We are modeling QCOM to generate ~$20B FCF between F2014/2015. The current commitment of ~75% return would imply ~$15B of this will be returned. Assuming ~$6B in dividend payments (~20% Y/Y increases during both F2014 and F2015) and the aggregate ~$7.8B now outstanding on the current buyback, this suggests the company is on pace to return ~$19-20B cash over F2014/2015.”
Raymond James’s Travis McCourt reiterated a Market Perform rating, noting the move is as he expected: “So far in fiscal 2014, beginning in October, the company has repurchased 27.6 million shares for $2 billion for an average repurchase price per share of $72.46. This would suggest roughly $1 billion repurchased in the March quarter to date. We note this is in line with our expectations, so no change in our financial model or estimates is required.”