Analog and embedded microchip giant Texas Instruments (TXN 1.89%) is keen on delivering value to its shareholders. Last week, the company raised its quarterly dividend payouts by 24% and more than doubled its commitment to share buybacks.
This was, of course, business as usual for Texas Instruments. But that doesn't take away from the announcement's shareholder-friendly message.
Image source: Getty Images.
What's new?
TI's dividend payouts keep rising like clockwork. The company has boosted its dividend-paying policy in September or October of every year since 2004. That's an unbroken 14-year streak of dividend boosts.
The increases also tend to be generous:
|
Year of Announcement |
Annual Payout Rate Per Share |
Increase Over Previous Year |
|---|---|---|
|
2017 |
$2.48 |
24% |
|
2016 |
$2.00 |
32% |
|
2015 |
$1.52 |
12% |
|
2014 |
$1.36 |
13% |
|
2013 |
$1.20 |
7% |
Data source: Texas Instruments.
The buyback program is no less impressive. This time, TI added another $6 billion to a share repurchasing policy that still had $4.6 billion of authorized spending left to use. The company has retired 286 million shares over the past five years, reducing the total share count by 25%.
What does it mean?
In short, Texas Instruments is committed to a long-standing promise to return cash to shareholders. The one-two punch of large buybacks and rising dividends delivers on that promise in two ways. Over the past four quarters alone, TI shoveled $4.04 billion right into shareholder pockets this way. During the same period, the company generated $4.04 billion of free cash flows. The current cash return to stock owners is very close to 100%, and the effective dividend yield right now stands at a solid 2.8%.
Moreover, the simple fact that TI is committing more cash to the buyback program means that the board and management teams believe the stock is severely undervalued at current prices. And don't forget that TI's dividend increases have served as an imperfect but useful guide to the company's total market value over the long run:
All told, this combined buyback and dividend boost is a vote of confidence in the chipmaker's future prospects. Insiders who have a significant stake in TI's stock and are privy to the best possible view of the company's operations expect share prices to rise over the long term.
This stock is easy to love, especially if you're investing for the long haul.
