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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 13.84% since the start of the year. Currently paying a dividend of $2.04 per share, the company has a dividend yield of 2.18%. In comparison, the Semiconductor - General industry's yield is 0.41%, while the S&P 500's yield is 1.34%.
In terms of dividend growth, the company's current annualized dividend of $4.08 is up 9.7% from last year. Texas Instruments has increased its dividend 5 times on a year-over-year basis over the last 5 years 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%. This means it paid out 57% of its trailing 12-month EPS as dividend.
TXN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $7.86 per share, which represents a year-over-year growth rate of 31.66%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TXN is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
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