Where does Texas Instruments (TXN) rank after its 32% announced dividend increase?

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Summary:  Texas Instruments’s (TXN) dividend was increased by an impressive 32%. TXN has delivered consistent divided increases over the past six years of over 22% per year. The semiconductor firm has delivered dividends to its shareholders uninterrupted since 1962, making the firm a dividend aristrocrat. The Dallas-based company is the largest producer of analog semiconductors. The quarterly dividend for the November payment will be $0.50 versus the prior year rate of $0.38 per share. The overall yield is 2.12%, just above that of the S&P 500. It ranks 29th among the top 50 technology sector companies in the world paying dividends.  The company also released positive quarterly financial results, with its 3rd quarter net income at $968 million (94 cents a share) versus $798 million (76 cents a share) a year earlier.  Despite the compelling dividend growth and strong financial rating, the firm does have elevated P/S and P/E ratios.  Texas Instruments does not qualify as a member of our Top 100 Dividend Stock List (see below).

The dividend will be paid at the new higher rate on November 21, 2016, to shareholders of record at close of business on November 7, 2016. Texas Instruments Inc. is currently priced at $70.73. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
11/7/2016 0.5
7/28/2016 0.38
4/28/2016 0.38
1/28/2016 0.38
10/28/2015 0.38
7/29/2015 0.34
4/28/2015 0.34
1/28/2015 0.34
10/29/2014 0.34
7/29/2014 0.3
4/28/2014 0.3
1/29/2014 0.3
10/29/2013 0.3
7/29/2013 0.28
4/26/2013 0.28
1/29/2013 0.21
10/31/2012 0.21
7/27/2012 0.17
4/26/2012 0.17
1/27/2012 0.17
10/27/2011 0.17
7/28/2011 0.13
4/28/2011 0.13
1/27/2011 0.13
10/28/2010 0.13
7/28/2010 0.12
4/28/2010 0.12
1/28/2010 0.12

Analysis of Texas Instruments Inc. is based upon our five key criteria for the Top 100 list, which include; 

Category Value Score
Dividend Yield 2.12% 272
Dividend Growth (3-6 year avg) 19.1%  92
Forward P/E 21.28  226
S&P Financial Rating A+  80
Beta 1.05 150
Total Score    820

Additional Information on dividend growth, price to sales, and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr max Yield % 5 yr low Yield %
2.12% 15.3% 22.9% 12.95 5.46 1.77 5.55 2.85% 1.66%

Final Analysis;

Positives;

  • Texas Instruments dividend yield is above that of the S&P 500 Index.
  • Texas Instruments maintains a 3 year dividend growth rate of 15.3%.
  • Texas Instruments has paid out a dividend consecutively for the past 44 years.
  • Texas Instruments maintains a solid investment grade rating.

Negatives

  • Texas Instruments is trading at a forward P/E ratio above the market. Additionally, its also trading at historic highs in regard to price/sales (P/S) ratio.  From a relative valuation perspective, Texas Instruments is overvalued.
  • Texas Instruments maintains a beta of 1.05, higher than the average company.
  • Texas Instruments current dividend yield (2.12%) is below its 5 year average historical dividend yield of 2.20% and max yield of 2.85%.

Based upon its high P/S ratio, high P/E ratio, and lower historical yield, Texas Instruments does not qualify as one of our Top 100 Dividend Stocks.

Texas Instruments Inc. Dividend Yield Historical Chart (Click to enlarge) txn3

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

Further information on dividend investing and evaluating dividend growth candidates can be found at http://seekingalpha.com/author/timothy-mcintosh/articles

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