Just a couple of months ago, Qualcomm Incorporated (QCOM 0.73%) was a stock shrouded in negative sentiment. The company's business practices were under investigation by the China National Development and Reform Commission, an investigation Qualcomm eventually settled in February for $975 million. If that weren't bad enough, Qualcomm notified investors last year that it believed certain licensees in China were underreporting sales of licensed 3G and 4G devices.

Qualcomm's problems in China cast a negative light on the company, and investors shunned the stock as a result. The stock is down 10% in the past year, while the S&P 500 Index is up 10% in the same time. But what Qualcomm's critics have missed during this difficult time is that the company still generates a ton of free cash flow, and has a cash-stuffed balance sheet, with little debt.

Qualcomm proved how strong its business is when it announced a major boost to its capital allocation program earlier this month.

Qualcomm puts its money where its mouth is
On March 9, Qualcomm announced it will be returning a boatload of cash to investors. The company increased its dividend by 14%. The new annualized payout is $1.92 per share, which results in a solid 2.8% yield at recent stock prices.

Not only that, but Qualcomm also unveiled a new $15 billion share-repurchase authorization. This replaces the existing program, which has $2.1 billion remaining. Qualcomm intends to repurchase $10 billion of its common stock within approximately one year of the announcement. This program will fulfill Qualcomm's stated goal of returning 75% of its free cash flow to investors in combined dividends and share buybacks.

Qualcomm can easily afford to be so generous with its cash because it's a cash-generating machine. It raked in $7.7 billion of free cash flow in fiscal 2014, which ended Sept. 28, and returned $6.7 billion to investors in combined share buybacks and dividends. Qualcomm now has $31 billion in cash and marketable securities, with no debt.

2015 likely to be another successful year
Despite everything that went wrong for Qualcomm in 2014, the company still grew earnings by 19%. Qualcomm got off to a strong start to fiscal 2015, as well, with 7% growth in revenue and diluted earnings per share, year over year. And if everything goes according to expectations, 2015 will be another good year for Qualcomm.

That's because Qualcomm is square in the middle of the global smartphone boom. Its MSM chip shipments hit 270 million devices last quarter, up 27% year over year. Due to the expectation of continued chip shipment growth, as well as the resolution with regulators in China, Qualcomm expects 2.5% revenue growth this year, at the midpoint of its forecast.

Don't get caught up by the headlines
It's easy for investors to view Qualcomm harshly, based on the negative headlines. But the settlement with Chinese regulators is an important step toward putting the issue behind it. The uncertainty of its licensing practices is a concern, but Qualcomm is gradually making progress with its licensees, and said it settled with one licensee last quarter. More generally, investors should know that management has consistently maintained that China still represents a major opportunity for the company.

It's easy to be distracted by what gets attention in the financial media, but Qualcomm's core underlying business is very strong. Qualcomm generates billions of free cash flow annually, and is about to return even more of it to investors through a generous dividend increase and huge share buyback.