What: Shares of Texas Instruments (NASDAQ:TXN) have gained 13% so far in 2016, according to data from S&P Global Market Intelligence. The semiconductor veteran left the S&P 500 market benchmark far behind at a mere 2.2% lift, and the SPDR S&P Semiconductor (NYSEMKT:XSD) sector index didn't rise more than 2.5%. In short, TI stands head and shoulders above the market this year.
So what: TI has delivered two earnings reports in 2016, beating bottom-line estimates in both. The fourth-quarter report in January revealed a 2% drop in revenue but record-level gross margin. Sales continued to decline in April's first-quarter release, though gross margin rose to set yet another all-time record.
Long story short, TI is actively optimizing its business operations for maximal efficiency and even further margin strength. If that means leaving a few low-margin sales on the table or divesting some less profitable product lines, so be it. TI is going there.
Now what: The cash produced by TI's rising profit margin is going straight back to shareholders, as management's stated policy is to return 100% of free cash flows directly to owners.
Over the last five years, this policy has reduced TI's share count by 13% while dividend payouts tripled. Share prices also doubled, putting a damper on the effective dividend yield, but yields still rose 47%.
As the company is quick to adjust to changing market conditions, its stock is the kind you can stick in your portfolio today and sleep soundly for decades ahead.
Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.