Why Texas Instruments is a Solid Long-Term Dividend Stock

Dividend stocks are an excellent choice for people who want to receive regular sums of cash from their investment portfolios while retaining the upward potential of stocks. However, it is important to note that choosing a good dividend stock with a good dividend is much easier said than done, not least because the concept of a good dividend can be more complicated than it sounds on initial consideration.

In short, some people might choose the biggest dividend that can be found out there. However, this is over-simplistic because a bigger dividend isn’t enough on its own to guarantee that an investor’s investment is being used to generate a return in an effective and efficient manner. As a result, a lot of people like to look at the dividend yield, which would be the annual dividend divided by the share price of the dividend stock. Said approach has its flaws, as shown by how it is perfectly possible for a dividend stock to have a high dividend yield just because its share price has crumbled. However, it is nonetheless a useful metric, particularly when used in combination with other factors such as reliability. As for why reliability is so important, the fact of the matter is that dividend stocks aren’t guaranteed to either pay dividends or pay dividends that increase in value over time. Yes, there are some dividend stocks that come with guaranteed dividends, but they make up no more than a part of the options that are available to interested individuals, meaning that investors will be missing out if they choose to stick to said dividend stocks. Due to this, a reliable option such as Texas Instruments can be very valuable indeed.

Have You Considered Texas Instruments?

Texas Instruments is one of the numerous tech companies that can be found in the United States. In the present time, it is separated into four divisions, which are analog products, digital light process, embedded processors, and educational tech. As a result, while there are a lot of people out there who will be most familiar with it because of its calculators and other educational tech products, it is involved in something much more important. After all, Texas Instruments is involved in the manufacturing of semiconductors, without which much of the modern world wouldn’t be possible. In fact, it should be mentioned that Texas Instruments is one of the leading semiconductor companies based on sales volume, thus making it that much more important.

What Makes Texas Instruments a Good Dividend Stock?

Here are some of the reasons why interested individuals might want to consider Texas Instruments as a dividend stock:

Higher than Normal Dividend Yield

For starters, Texas Instrument has a 2.66 percent dividend yield, which is better than what interested individuals can expect from tech companies on average. As a result, for people who like investing in tech companies while still wanting something that will provide them with a respectable dividend, this makes Texas Instrument a choice worth considering.

Rising Dividends Over Time

Generally speaking, people who want to hold on to a dividend stock for the long run will want to pay very close attention to whether its dividends have been increasing over time. After all, inflation will eat into the purchasing power of money over time, meaning that they will wind up getting less and less value out of their dividend stock unless the dividends are increasing at a faster rate than the inflation rate. However, it should also be noted that the ability to keep on increasing dividends in year after year speaks well of how a corporation is run, which in turn, should provide interested individuals with a measure of confidence that said trend can be expected to continue in the times to come. Something that matters a great deal because it determines whether interested individuals will continue to be paid the dividends that drew them to the dividend stock in the first place. For those who are curious, Texas Instruments has managed to increase its dividends in year after year for 15 years. This isn’t quite as good as, say, a dividend aristocrat with a minimum of 25 years or a dividend king with a minimum of 50 years. However, it is nonetheless persuasive proof that Texas Instruments’s success is more than just a short-lived fluke.

Good Prospects

As mentioned earlier, Texas Instruments is involved in a number of tech markets, thus making it less susceptible to the various issues that can pop up in any one market. However, what is particularly interesting about its products is that a huge portion of its sales come from the automotive industry, so much so that its sales to its automotive and industrial customers make up 56 percent of its total revenues. This is important because the automotive industry is expected to continue adding more and more computer chips to its products, which in turn, means that there will be more and more demand for Texas Instruments’s products. Something that bodes well for its future even if its prospects in other markets don’t look quite as good.

Further Considerations

Having said that, interested individuals should never buy a stock unless they have looked over it on their own. Investments are a serious business, meaning that they deserve serious consideration. Something that is particularly true when it comes to an investment that interested individuals plan to hold on to for the long run. For that matter, it should be mentioned that while Texas Instruments looks as though it has solid prospects for dividend paying, it is by no means a perfect investment. For example, it is spending huge sums on capital, which is supposedly because it is buying new rather than used equipment in order to expand its manufacturing capacities. Likewise, it has a higher inventory level, which is apparently attributable to a change in the corporation’s consignment strategy. Both of these explanations are plausible, but these factors are nonetheless potential causes for concern that might convince some investors to look elsewhere.