It's been an up-and-down year for semiconductor stock Texas Instruments (NASDAQ:TXN). Its stock price fell significantly in September after a warning from one of its peers in the chip industry. However, Texas Instruments' stock price has recovered from that and then some, because its underlying business has sailed through 2014 unscathed. Texas Instruments is growing -- and rewarding its shareholders with lots of cash flow through billions of dollars in share buybacks and dividend payments.

Here are two things Texas Instruments investors should keep in mind.

The vast majority of Texas Instruments' business is tied up in two key areas
Texas Instruments is not a very diverse business. While other technology companies manufacture a wide range of products, Texas Instruments is focused on two key businesses. These are analog and embedded processing, which collectively comprise 82% of the company's total revenue. The concentrated nature of its business is the result of a change of strategic direction. A few years back, Texas Instruments management decided to unload underperforming businesses, such as wireless, to instead focus on its core competencies. From there, the company  reduced its exposure to wireless virtually entirely. Management felt that analog and processing were far more lucrative, higher-growth opportunities, and it's clear this was the right strategy.

Texas Instruments holds a differentiated position that separates it from the competition because its remaining core areas of focus have high-value assets and products, with long life cycles. This has created sustained revenue and free cash flow growth during the past several years. For example, Texas Instruments' total revenue grew 8% last quarter. Over the preceding 12-month period, free cash flow was up 20%.

With this cash flow, Texas Instruments is very friendly to shareholders by buying back lots of its own stock and paying a high dividend. The company returned $670 million to shareholders through share repurchases and paid $319 million in dividends just last quarter. Texas Instruments is an aggressive dividend growth stock as well. Earlier this year, management bumped up the dividend by 13%. The stock has a dividend yield of 2.6%.

Because of its efficient business structure and high cash flow generation, investors should know that Texas Instruments appears to have a bright future going forward.

All clear ahead
In early October, peer semiconductor company Microchip Technology (NASDAQ:MCHP) warned investors that quarterly revenue would come in below its previous forecast as well as analyst projections. That sent semiconductor stocks crashing. Microchip fell 10% after the warning, but its announcement dragged down other chip stocks, too, including Texas Instruments, which saw its stock price drop dramatically in a span of just a few weeks. On Sept. 18, Texas Instruments traded for $49 per share. By Oct. 13, four days after Microchip's warning, Texas Instruments fell all the way to $41 per share, representing an approximately 16% decline.

Microchip blamed its poor quarter on sluggish demand in China and inventory buildups at its distributors. The reason the sell-off spread to Texas Instruments is that Microchip management also warned about industrywide conditions in general. However, Microchip's announcement served as a weak attempt to mask its own problems as an industrywide problem. That was realized soon enough, as Texas Instruments posted strong growth when it released its own quarterly numbers.

Consequently, Texas Instruments shareholders shouldn't be overly concerned. Management expects between $3.1 billion and $3.3 billion of revenue for the current quarter. The midpoint of that forecast range would represent 8% growth year over year. Clearly, this does not indicate any sort of slowdown. Texas Instruments is in a strong financial position as well, which should give shareholders a certain degree of confidence. The company has $3.4 billion of cash and marketable investments on its balance sheet and generates more than enough cash flow to continue its practice of share buybacks and paying a high dividend yield.

Texas Instruments now operates a lean organization with high-value products. Its financial success is evident in its quarterly results. Investors should know that as long as the company continues to grow, it will keep distributing lots of cash flow in the months ahead.

Bob Ciura 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.