Of all the investment opportunities out there, I have a special place in my heart for dividend growth stocks. As a subset of those, I like the ones on the list of Dividends Champions, Contenders and Challengers even better.
Recently I added another one of these Dividend Contenders to my portfolio.
On October 12 I bought 10 shares of Texas Instruments (TXN) for a total of $1,020.
Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide.
It operates in two segments, Analog and Embedded Processing.
The Analog segment offers power products to manage power requirements in various levels using battery management solutions, portable components, power supply controls, point-of-load products, switches and interfaces, integrated protection devices, high-voltage products, and mobile lighting and display products.
This segment also provides signal chain products that sense, condition, and measure signals to allow information to be transferred or converted for further processing and control for use in amplifier, data converter, interface product, motor drive, clock, and sensing product end-markets; and integrated analog and standard products, which are primarily for sale into personal electronics, industrial, and automotive markets.
The Embedded Processing segment offers connected micro-controllers, micro-controllers with integrated wireless capabilities, and stand-alone wireless connectivity solutions that are used in electronic equipment to sense, connect, log, and transfer data; and digital signal and applications processors for mathematical computations and specific computing activity.
This segment offers products for use in various markets, principally industrial and automotive. The company also provides DLP products, primarily for use in projectors to create high-definition images; calculators; and application-specific integrated circuits.
Texas Instruments Incorporated markets and sells its semiconductor products through direct sales and distributors, as well as online. The company was founded in 1930 and is headquartered in Dallas, Texas.
TXN’s current dividend yield is 3.10% – slightly below the average 3.5% yield I strive for in building my portfolio.
The company’s other dividend features are attractive.
For instance - the company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - with an impressive 15 year streak of growing dividend pay-outs.
The 5 year dividend growth is a nice double digit 22.42%, with the 1 year dividend growth coming in at 54.00%.
The Current Trailing Dividend Payout Ratio sits at 71%, providing some room for continued dividend growth.
TXN’s Earnings per Share (EPS) over the last five years show an 19.04% increase. Projected EPS growth for the next 3-5 years is +13.57%.
The Free Cash Flow Growth Rate over the last 5 years is +8.44%.
While all of that looks pretty attractive, the trailing 12 months Price/Earnings (P/E) is 22.86, which is slightly higher than it’s 5 year average of 21.81. It is lower though than the industry’s 5 year average of 30.44.
ISS-EVA Dimensions (an equity research firm) states in their October 16 report that AOS’s Performance Risk Valuation score is at the 57th percentile of all firms in its industry, which leads to a recommendation to Hold.
Ford Equity Research projects that AOS will perform in line with the market over the next 6 to 12 months. Ford’s 52-Week Price Range is between $93.43 - $119.89.
Jefferson Research states that contends that TXN is showing strong Earnings Quality, Cash Flow Quality, Operating Efficiency and Balance Sheet Quality, and Valuation suggests a lower amount of price risk. When combined, TXN deserves a BUY rating.
Given AOS’s annual dividend of $3.08 per share, this new purchase increased my forward annual dividend income by $30.80.