Texas Instruments Inc (NASDAQ:TXN) Offers a Strong Dividend Profile for Income Investors

For investors looking for dependable income, dividend investing is a fundamental strategy that mixes immediate income with lasting capital protection. One organized method uses filters to find companies with good dividend traits while keeping sufficient profitability and financial soundness. This process helps find businesses able to maintain and possibly raise their dividend payouts over the long term, instead of just pursuing the highest yields that might point to hidden financial trouble. By concentrating on a full set of basic measures, investors can create collections of companies with a proven record of returning value to shareholders and having stable operations.

Dividend Profile Evaluation

TEXAS INSTRUMENTS INC (NASDAQ:TXN) makes a strong case for investors focused on dividends, receiving a ChartMill Dividend Rating of 7 out of 10. The company's dividend features show both good current income and a history of dependability:

• Dividend Yield: Now at 2.98%, TXN provides a yield greater than the industry average of 2.15% and the S&P500 average of 2.44%
• Dividend Growth: The company has reliably raised its dividend by an average of 10.46% each year, showing a solid dedication to benefiting shareholders
• Payment History: TXN holds a perfect record of never cutting its dividend for a minimum of ten straight years

The mix of a better-than-average yield and steady growth makes Texas Instruments especially interesting for investors wanting both present income and a guard against inflation via increasing dividend payments.

Profitability Foundations

Good profitability forms the base for lasting dividend payments, and Texas Instruments performs well here with a ChartMill Profitability Rating of 8. The company's operational effectiveness and earning ability give good support for its dividend responsibilities:

• Return Measures: Outstanding returns on assets (14.36%), equity (30.57%), and invested capital (15.76%) all place in the top group compared to others in the semiconductor industry
• Margin Performance: Profit margin of 30.07% and operating margin of 34.89% are much better than industry averages, although recent margin reduction needs watching
• Cash Flow Creation: Steady positive cash flow from operations over the last five years makes sure the company can pay for dividends from real business results instead of borrowing or selling assets

These profitability numbers show that Texas Instruments makes enough profit to continue its dividend program while still keeping money for reinvestment and business projects.

Financial Health Review

With a ChartMill Health Rating of 6, Texas Instruments keeps suitable financial steadiness to manage economic changes while continuing dividend payouts. The company's balance sheet shows both positive aspects and points for close attention:

• Liquidity Status: Solid current ratio of 5.81 and quick ratio of 3.88 give significant short-term financial room
• Solvency Measures: An Altman-Z score of 8.84 shows very low bankruptcy danger, although higher debt amounts and a debt-to-equity ratio of 0.86 have become less strong compared to past levels
• Cash Flow Support: The debt-to-free-cash-flow ratio of 9.34, while higher, stays consistent with normal industry levels

While the payout ratio of 97.71% seems worrying initially, this number must be viewed together with the company's good cash flow creation and anticipated profit growth of 15.54% per year, which should make dividend support better over time.

Valuation and Growth Background

Texas Instruments sells at a forward P/E ratio of 26.70, about the same as the wider market even though it works in an industry with ups and downs. The company's valuation seems fair when looking at:

• Industry Standing: TXN sells for less than semiconductor industry averages for both regular and forward P/E ratios
• Growth Outlook: Expected sales growth of 10.29% and EPS growth of 16.92% per year back future dividend raises
• Quality Difference: The company's outstanding profitability and market standing might support a somewhat higher valuation compared to other dividend payers of lower quality

The speeding up growth pattern, changing from slower historical growth to better expected future growth, indicates Texas Instruments might be starting a phase where dividend growth could possibly speed up.

Investment Points

For dividend investors, Texas Instruments offers a mixed chance joining acceptable current yield with good growth possibility and satisfactory financial health. The company's leading role in analog semiconductors and embedded processing gives it competitive strengths that help continued dividend dependability. While the high payout ratio needs attention, the combination of expected profit growth, good cash flow creation, and historical dedication to shareholders indicates the dividend likely remains secure.

Investors can find more dividend stock options using the Best Dividend Stocks screen, which uses similar standards for dividend quality, profitability, and financial health. For a full basic analysis of Texas Instruments, see the complete fundamental report.

Disclaimer: This analysis uses present basic data and is not investment advice. Investors should perform their own research and think about their personal money situation before making investment choices. Past results do not ensure future outcomes, and dividend payments can be changed or stopped by the company's choice.