GuruFocus Research
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Exploring the Sustainability and Growth of Texas Instruments Inc's Dividends
Texas Instruments Inc (NASDAQ:TXN) recently announced a dividend of $1.3 per share, payable on 2024-05-21, with the ex-dividend date set for 2024-05-07. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Texas Instruments Inc's dividend performance and assess its sustainability.
What Does Texas Instruments Inc Do?
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Dallas-based Texas Instruments generates over 95% of its revenue from semiconductors and the remainder from its well-known calculators. Texas Instruments is the world's largest maker of analog chips, which are used to process real-world signals such as sound and power. Texas Instruments also has a leading market share position in processors and microcontrollers used in a wide variety of electronics applications.
A Glimpse at Texas Instruments Inc's Dividend History
Texas Instruments Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis. Texas Instruments Inc has increased its dividend each year since 1998. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 26 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Texas Instruments Inc's Dividend Yield and Growth
As of today, Texas Instruments Inc currently has a 12-month trailing dividend yield of 2.84% and a 12-month forward dividend yield of 2.91%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Texas Instruments Inc's annual dividend growth rate was 10.50%. Extended to a five-year horizon, this rate increased to 13.70% per year. And over the past decade, Texas Instruments Inc's annual dividends per share growth rate stands at an impressive 18.20%.
Based on Texas Instruments Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Texas Instruments Inc stock as of today is approximately 5.40%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2024-03-31, Texas Instruments Inc's dividend payout ratio is 0.81, which may suggest that the company's dividend may not be sustainable. Texas Instruments Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Texas Instruments Inc's profitability 9 out of 10 as of 2024-03-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Texas Instruments Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Texas Instruments Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Texas Instruments Inc's revenue has increased by approximately 7.30% per year on average, a rate that outperforms approximately 52.81% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Texas Instruments Inc's earnings increased by approximately 4.50% per year on average, a rate that outperforms approximately 47.73% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 8.80%, which outperforms approximately 43.14% of global competitors.
Conclusion: Assessing the Future of Texas Instruments Inc's Dividends
Considering Texas Instruments Inc's consistent dividend growth, robust profitability, and solid growth metrics, the company presents a compelling case for dividend investors. However, the relatively high payout ratio may warrant caution. Investors should keep an eye on the company's future earnings reports and any potential changes in dividend policy. For those looking to explore further, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circ*mstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
