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Is Texas Instruments (TXN) a High-Growth Dividend Stock?

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Texas Instruments in Focus

Texas Instruments (TXN - Free Report) is headquartered in Dallas, and is in the Computer and Technology sector. The stock has seen a price change of 7.79% since the start of the year. The chipmaker is currently shelling out a dividend of $0.62 per share, with a dividend yield of 2.2%. This compares to the Semiconductor - General industry's yield of 1.01% and the S&P 500's yield of 1.78%.

Looking at dividend growth, the company's current annualized dividend of $2.48 is up 17% from last year. Texas Instruments has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 18.93%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Texas Instruments's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, TXN expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $5.66 per share, which represents a year-over-year growth rate of 32.24%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TXN is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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