In 2022, the U.S. Congress recently the $52 billion CHIPS and Science Act. Tax credits and subsidies under the legislation should spur computer chip manufacturers like Texas Instruments, to build new plants in the U.S., which currently produces just 12% of the world’s supply. Increasing domestic chip production will also cut U.S. reliance on imports from China, and from Taiwan.
This firm offers investors a great way to profit from this trend. That’s mainly because the company continues to benefit from its 2011 decision to quit making chips for cellphones and to focus on analog chips for the Internet of Things.
The stock trades at 21.9 times the company’s 2023 earnings forecast.
The Growing Power of Dividends
Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.
The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.
TEXAS INSTRUMENTS INC. (Nasdaq symbol TXN; www.ti.com) makes analog chips, which convert inputs like touch and sound into electronic signals that computers can understand.
In the quarter ended June 30, 2023, Texas Instruments’ revenue fell 13.1%, to $4.53 billion from $5.21 billion a year earlier. That’s mainly because weaker consumer demand for electronic devices offset improving sales to automotive manufacturers. Despite the decline, the latest revenue figure still topped the consensus forecast of $4.37 billion.
Earnings in the quarter also fell 24.8%, to $1.72 billion from $2.29 billion. On a per-share basis, its earnings slipped 23.7%, to $1.87 from $2.45, on fewer shares outstanding. That also beat the consensus estimate of $1.76. The lower earnings are partly due to higher spending on new chip plants and operating costs.
Dividend Stocks: Texas Instruments’ new facilities will save costs in 2025
Texas Instruments spends a high 10% of its revenue on research. Thanks to those outlays, the company has launched several new video-processing chips that use less energy than traditional chips. That makes it cheaper for designers to add more cameras to the AI-powered programs that analyze visual inputs such as traffic flows.
The company is also building a new facility in Sherman, Texas, to house as many as four new chipmaking plants. In all, costs could reach $30 billion. The first facility should begin operating in 2025. Those new plants will let it make chips at much lower costs than its competitors.
Starting November 2022, Texas Instruments raised your quarterly dividend by 7.8%, to $1.24 a share from $1.15. The new annual rate of $4.96 yields 3.0%.
Texas Instruments has raised your dividend by an average 14.9% annually over the last 5 years. The company’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: Texas Instruments Inc. is a buy.