Qualcomm (QCOM) increases dividend by 8% & trades at a historically low valuation

Qualcomm’s (NYSE:QCOM) dividend was increased by 8%.  Its new overall yield is 4.31%. The firm started paying a dividend in 2003.

Qualcomm is one of the largest semiconductor firms in the United States. The technology firm licenses wireless technology to major phone carriers through its substantial patent ownership. The patents reside in the key CDMA and OFDMA technologies.  These remain the standards through which the major manufacturers operate in. Qualcomm also provides major producers chip processors. It operates globally. The firm was founded in 1985 and is headquartered in San Diego, California.

Qualcomm has maintained a three-year growth rate of dividends of 12.4 percent. Qualcomm currently ranks 1st in dividend yield within the large cap technology, communication equipment category. The quarterly dividend for the June payment will be $0.57 versus the prior year rate of $0.53 per share. Qualcomm is a member of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on June 21, 2017, to shareholders of record at close of business on May 31, 2017. Qualcomm Inc. is currently priced at $54.93. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
5/31/2017 0.57
2/27/2017 0.53
11/28/2016 0.53
8/29/2016 0.53
5/27/2016 0.53
2/29/2016 0.48
11/27/2015 0.48
8/31/2015 0.48
6/1/2015 0.48
3/2/2015 0.42
11/26/2014 0.42
8/29/2014 0.42
6/2/2014 0.42
3/3/2014 0.35
11/27/2013 0.35
8/30/2013 0.35
6/3/2013 0.35
3/6/2013 0.25
12/5/2012 0.25
9/5/2012 0.25
5/30/2012 0.25
2/29/2012 0.215
11/21/2011 0.215
8/24/2011 0.215
5/25/2011 0.215
2/23/2011 0.19
11/22/2010 0.19
8/25/2010 0.19
5/26/2010 0.19
2/24/2010 0.17

Analysis of Qualcomm is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 4.31% 79
Dividend Growth (3-7 year avg) 14.9 196
Forward P/E 12.48 48
S&P Financial Rating A+ 262
Beta 0.90 189
Total Score 774
% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate SPS 2017 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr low Yield % 5 yr max Yield %
4.31% 12.4 14.9 16.9 3.13 2.95 7.30 1.50% 4.35%

Positives;

  • Qualcomm maintains an investment grade rating of A+.
  • Qualcomm’s current dividend yield (4.31%) is at the top of its five-year average historical dividend yield.
  • Qualcomm maintains a beta of 0.90, lower than the average company.
  • Qualcomm is trading at the bottom of its ten-year average price/sales (P/S) ratio.
  • Qualcomm’s dividend yield is above that of the S&P 500 Index.
  • Qualcomm has paid out a dividend consecutively for the past 14 years.

Latest Earnings & Overall Analysis:

Qualcomm issued its earnings data on April 19th. Qualcomm reported earnings Q2 that came in above analyst expectations. Net income dropped to $749 million in Q2, or 50 cents per share, from $1.16 billion, or 78 cents per share last year. Revenue fell to $5.02 billion from $5.55 billion. Qualcomm had earnings of $1.34 a share. After adjusting the total revenue to account for the arbitration award won by BlackBerry, Qualcomm sales would have come in just short of $6 billion. This was slightly above expectations by analysts. Qualcomm was expected to have sales of $5.8 billion, according to FactSet. Qualcomm Q3 projections account for the great uncertainty from its battle with Apple. Thus, the Q3 projections are very wide, from 67 cents to 92 cents a share.

For Q2, Qualcomm’s revenue from its critical licensing division was up just over 5 percent from a year ago at $2.2 billion. The technology division also had stellar growth, with revenue coming in at $3.6 billion. This was 10 percent higher than the year ago period. The firm was assisted from average prices that were higher during Q2.

The lower future revenue and earnings estimate for Q3 were primarily due to its problem with Apple. Apple’s contract manufacturers underpaid royalties to Qualcomm in Q2.  Apple said the firm will continue this negative royalty behavior until it solves its dispute with Qualcomm in court. These underpaid royalties were due to the fact that Qualcomm has not paid Apple under a contract dispute.  Much of this is due to the $1 billion dollar lawsuit from Apple. Apple has argued continuously that the firm is charged much higher rates than other providers, like Samsung. Qualcomm has filed a suit against Apple for not meeting its contractual agreements. Qualcomm is also in a battle with South Korea over patent fees and its refusal to license to certain carriers within the country. It also has an ongoing dispute with Blackberry.

The quarter had a big hit to revenue, with a$974 million reduction to revenue due to the negative BlackBerry arbitration decision.  This disputes have clouded Qualcomm’s successes, such as its pending acquisition of NXP Semiconductor.  Qualcomm has notable new products. This includes its 835 Snapdragon processor. This process is the first to go under the 10 nanometer mark. These products will be used in high-end cell phones such as Samsung Galaxy, LGV20, and HTC phones.

2016 2015 2014 2013 2012
Earnings per Share 4.44 4.66 5.27 4.51 3.71
Annual Dividend 2.02 1.8 1.54 1.2 0.93
Payout Ratio 45.50% 38.63% 29.22% 26.61% 25.07%
Despite all the numerous issues with vendors. we anticipate that Qualcomm will be able to withstand these suits and ultimately have consistent royalty revenue. Qualcomm has a compelling advantage in the industry.  It the first and premier firm for the technology called CDMA, or third-generation 3G. It is the top wireless communications standard. It currently holds a true monopoly in 3G along with a superior position in 4G wireless. This what Apple and many other phone product producers are unhappy about. That Qualcomm continues to gain revenue from its patent and is the lead in future movements up towards faster platforms.
Although the range is wide, we expect the firm to produce $4.35 in earnings for this year, with a potential to earn 30 cents more with positive results with Apple. The firm thus is trading at just above 12 times earnings for the full fiscal year. It also trades at a historically low price/sales ratio and maintains a very high yield of over 4 percent. The company maintains a below market beta and a strong investment grade credit rating. Although there is uncertainty with the problems with patents and lawsuits, the low valuation and high dividend more than offset the risk. The firm remains a strong candidate within the technology space for any dividend investor.
Earnings per Share 2017 (projected) $4.35
Dividend 2.24
Payout Ratio 48.17%

Based on the firm’s financial credit rating, elevated dividend yield and low beta, Qualcomm Inc. qualifies as one of our Top 100 Dividend Stocks

Qualcomm Inc. Dividend Yield Chart (Click to enlarge)

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

2 thoughts on “Qualcomm (QCOM) increases dividend by 8% & trades at a historically low valuation

  1. QCOM is looking very tempting around these levels and I hope to get some shares added to my portfolio. The AAPL issue should be dealt with in rather short order although if AAPL gets their way QCOM could be facing lower fees for their IP In the future. Overall though the valuation looks really cheap and the dividend yield abnormally high which should act as a bit of a floor to the stock price since the dividend is still well covered.

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