- Oops!Something went wrong.Please try again later.
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Texas Instruments in Focus
Texas Instruments (TXN) is headquartered in Dallas, and is in the Computer and Technology sector. The stock has seen a price change of 18.74% since the start of the year. The chipmaker is currently shelling out a dividend of $1.02 per share, with a dividend yield of 2.09%. This compares to the Semiconductor - General industry's yield of 0.62% and the S&P 500's yield of 1.42%.
Looking at dividend growth, the company's current annualized dividend of $4.08 is up 9.7% from last year. Over the last 5 years, Texas Instruments has increased its dividend 5 times on a year-over-year basis for an average annual increase of 21%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Texas Instruments's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TXN expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $7.86 per share, representing a year-over-year earnings growth rate of 31.66%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, TXN is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research