Texas Instruments said it will ramp up its quarterly cash dividend by 13% to $1.02 as the semiconductor company continues to generate free cash flow.
Texas Instruments (TXN) will be raising its quarterly dividend from $0.90 per share to $1.02, or $4.08 on an annualized basis. The higher dividend will be payable on Nov. 16 this year to stockholders of record on Oct. 30, 2020. The payout is still awaiting formal approval by the board of directors at the company’s regular meeting in October.
“This dividend increase is an integral piece of Texas Instruments’ disciplined approach to capital management and reflects the company’s continued strength in free cash flow generation and its commitment to return excess cash to stockholders,” Texas said in a statement.
The dividend hike marks 17 consecutive years of dividend increases. In the 12-month period ending June 2020, Texas has paid 56% of its free cash flow in dividends.
In addition, the semiconductor company said that as of the second quarter of 2020, it has also reduced its outstanding shares by 47% through its consistent share repurchases since the end of 2004.
TXN shares have been on a steady gaining streak since hitting a low at the end of March and are now trading 9.5% higher than at the start of the year. The $141.52 average analyst price target suggests that shares are more than fully priced at current levels.
Merrill Lynch analyst Vivek Arya recently reiterated a Buy rating on the stock with a $155 price target based on 26 times estimated 2021 enterprise value/free cash flow. Arya believes that the price target is justified by TXN’s best-in-class profitability and cash flow returns.
Citigroup analyst Christopher Danely raised the stock’s price target to $155 from $138, saying that the company’s recent quarterly results benefited from work-from-home trends. Looking ahead though, Danely is in doubt that the strength is sustainable given the economic downturn and expects “muted revenue growth in the coming quarters”.
Nonetheless, Danely maintained a Buy rating on the stock as he likes Texas’ “superior earnings growth” but he closed his “positive catalyst watch” on the shares.
The rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is based on 9 Buys versus 10 Holds and 3 Sells. (See TXN stock analysis on TipRanks)
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