Texas Instruments Inc (NASDAQ:TXN): A Strong Dividend Pick with Steady Growth and Financial Stability

Dividend investors frequently look for a mix of yield, sustainability, and financial strength when choosing stocks. One way to find these opportunities is by using a stock screener focused on dividends, which selects companies with high dividend ratings and stable profitability. TEXAS INSTRUMENTS INC (NASDAQ:TXN) stands out as a potential pick, meeting important criteria that make it a candidate for income-focused portfolios.

Key Dividend Qualities of Texas Instruments

The company attracts dividend investors for several reasons, as seen in its fundamental analysis report:

• Steady Dividend Growth: TXN has raised its dividend for at least 10 straight years, with an average growth rate of 10.46% over the last five years. This pattern shows management’s dedication to rewarding shareholders, a key feature for long-term dividend plans.
• Attractive Yield: At 2.93%, TXN’s dividend yield is higher than both the industry average (2.45%) and the S&P 500’s average (2.39%). While not the highest yield, it balances income and growth potential.
• Leading Industry Position: The company ranks better than 93.6% of its semiconductor industry peers in dividend yield, highlighting its strength in shareholder payouts within a cyclical sector.

Profitability Backs Dividend Stability

A strong dividend rating isn’t sufficient on its own—profitability ensures payouts can continue. TXN’s ChartMill Profitability Rating of 8/10 reflects solid fundamentals:

• Healthy Margins: The company has an operating margin of 34.9% and a profit margin of 30.1%, outperforming 92.7% of industry peers. These margins help sustain and increase dividends.
• Expected Earnings Growth: Analysts predict annual EPS growth of 17.4% in the coming years, which should support further dividend hikes.

Financial Strength: A Note of Caution

While TXN’s ChartMill Health Rating of 6/10 shows no immediate solvency concerns, there are details to consider:

• Strong Liquidity: A current ratio of 5.8 and quick ratio of 3.9 indicate TXN can easily cover short-term obligations, a plus for dividend reliability.
• Debt Factors: The company’s debt-to-equity ratio (0.86) is higher than 84.5% of peers, though its Altman-Z score (9.24) suggests minimal bankruptcy risk. Investors should watch leverage, but it doesn’t currently endanger the dividend.

Valuation and Growth Balance

TXN trades at a premium (P/E of 35.6), which may discourage value-focused investors. However, this valuation is supported by:

• Better-than-industry profitability and rising revenue growth (projected at 10.8% yearly).
• A history of dividend growth, which often justifies a higher multiple in stable sectors.

Final Thoughts for Dividend Investors

Texas Instruments suits a dividend growth approach, providing a blend of yield, consistency, and financial durability. While its payout ratio (97.7% of earnings) seems elevated, the company’s cash flow and expected earnings growth suggest the dividend is sustainable.

For investors searching for similar options, review the full Best Dividend Stocks screen to discover more high-quality dividend stocks.

Disclaimer: This article is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.