Texas Instruments (Nasdaq: TXN) investors got some good news after the market close on Thursday when the company announced it would be returning more cash to its shareholders. Semiconductor stocks are not typically known for their capital return programs, but Texas Instruments boosted both its dividend payout and share repurchase budget.
Texas Instruments plans to add another $6 billion to roughly $4.6 billion currently authorized under its share repurchase program. The company did not give a specific timetable for the repurchases.
The chipmaker also raised its quarterly dividend payout from 50 cents to 62 cents per share, a 24 percent hike. Texas Instruments will now pay $2.48 per share in annual dividends, roughly a 2.8 percent yield. Shareholders will receive their first 62-cent quarterly dividend on Nov. 13.
Investors seem to approve of the hike, sending Texas Instruments stock higher by 1.2 percent in early Friday trading.
“Dividend increases and share repurchases are both part of TI’s capital management strategy and reflect the company’s strong free cash flow generation and commitment to return excess cash to shareholders,” the company says in a statement. “With today’s announcement, the company has increased dividends each of the past 14 years, and through consistent share repurchases has reduced outstanding shares by 42 percent since the end of 2004.”
In the past year, Texas Instruments has returned 47 percent of its free cash flow to shareholders in the form of dividend payments.
Jefferies analyst Mark Lipacis says investors should expect the 14-year streak to continue.
“TXN’s policy to return 100 percent of its FCF and cash from stock exercises (after debt service) is [the] best practice in semis, and has translated to a premium valuation multiple, which we expect will sustain,” Lipacis says. “We expect TXN’s dividend to grow as revenue and gross margins expand.”
Lipacis says…
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