New Buy: Qualcomm Inc. (QCOM)

Although I like composing watchlists, I like executing on them even more. At the beginning of this month I put three companies in my crosshairs and yesterday I pulled the trigger on the first one.

As my first buy of the month I bought an additional 34 shares of Qualcomm Inc. (QCOM) for a total of $1,890.87. In this post I break down my reasons for adding to the existing QCOM position in my portfolio and what this means for my forward dividend income. 

Qualcomm develops, designs, manufactures, and markets digital communications products and services in China, South Korea, Taiwan, the United States, and internationally. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).

In October of last year the company announced the acquisition of NXP Semiconductors for a total of $47 billion. Through this acquisition Qualcomm will be able to grow faster in future industries such as drones and self driving cars.

My original purchase of Qualcomm dates back to November of 2015 when the stock was at $48.80. I initiated a modest position of 16 shares back then.

After that purchase Qualcomm enjoyed a rally to ~$70. More recently the stock showed a sharp decline due to several competition and patent issues.

I tend to like price drops because they are potential buying opportunities. However, as a DGI investor I don’t care too much about price at any given day but try to focus on other factors. One of these factors is the fact that Qualcomm is a dividend contender, boasting 14 years of dividend increases. The current yield is an appealing 3.86% with a payout of 65%.

Qualcomm’s Earnings per Share (EPS) show a 5 year annualized growth of +7.13%. At my time of purchase the Price/Earnings (PE) ratio was 16.75, below the 5 year average of 18.18.  

Both the current as well as the 5 year average PE are lower than the industry average, indicating that QCOM is currently undervalued as compared to other Semiconductors & Semiconductor Equipment stocks.

In their February 11 report S&P Capital IQ marks Qualcomm as a 4 star buy with 12 month target price of $70.

Given Qualcomm’s dividend of $0.53  per share and it’s quarterly payout this buy means an addition of $72.08 to my forward dividend income.

What do you think about Qualcomm right now? Leave a comment/reply to share your thoughts!

Author: Tall Investing

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