Texas Instruments Incorporated(NASDAQ:TXN) is one of the best semiconductor stocks, with a strong dividend yield and several short-term growth catalysts. The Texas-based semiconductor company recently increased its dividend by a whopping 24%. TI stock’s dividend yield now stands at 2.56%. The company has increased its dividends consistently over the last 14 years. In the 12-months period ended on September 30, Texas Instruments paid about 47% of its free cash flow its dividends. This shows that the company’s dividend yield is safe and well covered by its cash.
Analysts think that Internet of Things is the biggest growth catalyst for TI stock. The company has several connectivity solutions for Internet of Things. According to an estimate, B2B spending on IoT technologies, will reach $267 billion by 2020. Texas Instruments has a partnership with IBM and ARM Holdings to launch a new IoT operating system. Around 3 years ago, the company launched two SimpleLink Wi-Fi platforms for IoT applications.
The second biggest growth driver for TI is the company’s foray into the lucrative automotive market. The demand of ADAS (Advanced Driver Assistance Systems) is skyrocketing around the world. Almost every major car company is working on driverless cars. The demand of System on Chips (SoCs) for driverless cars will rise in the future. Earlier this year, Texas Instruments announced a new line of mmWave sensors which are much smaller in size and highly accurate. These sensors can be used in cars and radar systems to power adaptive cruise control, highly automated highway driving, park assist, and driver monitoring.
Taken from https://seekingalpha.com/article/4101410-texas-instruments-still-room-run?page=2
According to a report from Zacks, the market of chips that are used in hybrid electric vehicles, telematics and advanced driver assistance systems (ADAS) is expected to increase at a CAGR of about 19% over the next 5 years. The report also says that Texas Instruments Incorporated(NASDAQ:TXN) will be one of the biggest beneficiaries of this trend.
In order to bypass the cyclical nature of the semiconductor industry, Texas Instruments has started to outsource the production of memory wafers to third parties. In the latest fiscal year, 40% of the company’s total production was done by third parties. As a result, Texas Instruments was able to increase its return on invested capital (ROIC).
TI stock is up over 35% since the start of this year.