Is Texas Instruments Incorporated (NASDAQ:TXN) A Smart Choice For Dividend Investors?
Texas Instruments Incorporated (NASDAQ:TXN) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 3.1% to shareholders, making it a relatively attractive dividend stock. Does Texas Instruments tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Texas Instruments
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it paying an annual yield above 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
How does Texas Instruments fare?
The current trailing twelve-month payout ratio for the stock is 52%, which means that the dividend is covered by earnings. Going forward, analysts expect TXN’s payout to remain around the same level at 52% of its earnings, which leads to a dividend yield of 2.9%. In addition to this, EPS should increase to $5.56.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of TXN it has increased its DPS from $0.44 to $3.08 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Texas Instruments generates a yield of 3.1%, which is high for Semiconductor stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Texas Instruments as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for TXN’s future growth? Take a look at our free research report of analyst consensus for TXN’s outlook.
Valuation: What is TXN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TXN is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
