The U.S. Congress recently passed the $52 billion CHIPS and Science Act. Tax credits and subsidies under the legislation should spur computer chip manufacturers 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.
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TEXAS INSTRUMENTS INC. (Nasdaq symbol TXN; www.ti.com) is a leading maker of analog chips. Its products convert inputs like touch, sound and pressure into electronic signals that computers can understand.
Supply chain problems related to China’s zero-COVID lockdown policies helped push down Texas Instruments’ stock from the start of 2022.
In the quarter ended December 31, 2022, Texas Instruments’ revenue fell 3.4%, to $4.67 billion from $4.83 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 $4.63 billion.
Earnings in the quarter also fell 8.2%, to $1.96 billion from $2.14 billion. On a per-share basis, earnings slipped 6.2%, to $2.13 from $2.27, on fewer shares outstanding. That also beat the consensus estimate of $1.98. The lower earnings are partly due to higher spending on new chip plants and operating costs.
The company will probably earn $8.02 a share in 2023, and the stock trades at 20.2 times that estimate. That’s a reasonable multiple in light of Texas Instruments’ high research spending—equal to 9.3% of the company’s revenue in the latest quarter.
With the November 2022 payment, Texas Instruments increased your quarterly dividend by 7.8%, to $1.24 a share from $1.15. The new annual rate of $4.96 yields 2.9%. The company has now raised the annual dividend rate each year for the past 19 years.
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.
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