As the year comes to a close, many dividend investors are looking to rebalance their portfolios -- especially given this volatile year in the stock market. And while buying into a tech stock to earn a dividend may not seem like the right alternative to explore given the sector's generally low percentage yield on the few companies in the sector offering dividends, semiconductor-manufacturer Texas Instruments (NASDAQ:TXN) is one company that bucks the trend. 

Texas Instruments operates from a solid foundational position

With a 90-year history and a still significant promise for future growth, Texas Instruments is likely to maintain its streak of years of solid returns. Although traditionally known for its graphing calculators, the company's bread-and-butter is actually designing, testing, and manufacturing diverse analog and embedded components in the semiconductor industry. This includes chips, converters, amplifiers, wafers, and more. Texas Instruments boasts a large portfolio of products with a huge application base, and it follows certain precepts that prove a good match for a dividend-based portfolio.

Computer motherboard.

Image source: Getty Images.

Texas Instruments is an industry leader, committed to returning much of its free cash flow to its shareholders in the form of dividend payouts. It maintains a long-term outlook, investing in long-cycle products that will deliver value over many years as technology reliance builds, peaks, then wanes.

As such, it generates strong yearly revenue on a somewhat cyclical basis, growing from $12.2 billion in 2013 up to a peak of $15.8 billion in 2018. Revenue declined in 2019, however, by nearly 9%, as the company hit the end of its current product-cycle run. 

Additional features of its solid finances are its low debt and strong free cash flow, which not only helps Texas Instruments continually invest in evolving technologies but also return value to its shareholders. At the end of 2019, the company's current liabilities metric had fallen 14% year over year, while its debt-to-equity ratio was halved from its total five years prior. Texas Instruments continues to produce solid operating margins, with free cash flow amounting to 40.3% of revenue. When combining the run-up in stock price and the dividend payout for all of 2019, the total shareholder return for the year amounted to a 39.6% gain.

Texas Instruments has a long-term strategy

Texas Instruments' long-cycle strategy provides a stable footing for the company as technology evolves. The initial preparation and build-out of factories to accommodate new technology is costly, but the company is able to even out that cost over time since so many of its products are integral to our everyday use. 

With regard to the latest trend, Texas Instruments' diverse product range is a strong fit for the Internet of Things (IoT), where many items will be connected to the internet or other devices. All smart tech needs semiconductors to function, and Texas Instruments is committed to providing this at an affordable cost. Its last product cycle provided years of sequential growth, and already, the company is building factories to prepare for the next run based on chips with more than double the capacity when compared to the previous semiconductor design.

Texas Instruments has a decent dividend payout

Texas Instruments focuses heavily on maintaining a clean book while providing value to its customers and investors. Although its compound average growth rate from 2017 to 2019 was only 2.5%, its operating profit margin was 41% and entirely based on organic growth.

Dividends per share growth chart for Texas Instruments.

Image source: Texas Instruments.

The company's dividends per share have risen significantly over time, and this year, the yield is 2.56%. While such a yield might seem low compared to other large-cap companies in other sectors, the average tech company listed on the S&P 500 index only pays a 1% dividend yield. And considering that interconnected devices are increasingly playing a larger part in our daily lives, Texas Instruments' potential market will only grow further. 

The company has a decent dividend payout and pursues long-term strategies for steady growth. As a result, this stock should make a solid buy for any investor looking to add a stable tech stock to a dividend-based portfolio. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.