Texas Instruments Raises Dividend By 24%, And It'll Likely Raise Again

Close on the heels of Texas Instruments Incorporated TXN bumping up its quarterly dividend by 24 percent, Jefferies said in a note it expects the company to raise its dividend yet again.

As such, the firm reiterated its Buy rating on the shares of Texas Instruments and its $96 price target.

At time of publication, Mark Lipacis noted that the company announced a quarterly dividend of 62 cents per share, up 12 cents and translating to a dividend yield of 2.9 percent. The first dividend payment is scheduled for Nov. 13, 2017.

The analyst noted the dividend yield of 2.9 percent for Texas Instruments compared to the 2 percent for the S&P 500 and marked the second highest in its coverage universe.

See also: Why It's Too Soon To Judge Apple's Next Product Cycle

Jefferies also noted that the company's board has authorized a $6 billion buyback program. This is in addition to the $4.6 billion pending from its previously authorized repurchases.

Thus, the firm said Texas Instruments' policy to return 100 percent of its free cash flow to shareholders is the benchmark in the semiconductor sector. This, according to the firm, has translated to a premium valuation multiple, which it said the company can sustain.

Jefferies expects the dividend to grow, as revenues and gross margins expand. The firm said it favors Texas Instrument as a Tectonic Shift play on IoT, and as a beneficiary of a budding U.S. CapEx cycle.

Additionally, the firm sees gross margin tailwinds from increased 300 million capacity utilization. The firm also noted that the company is a market share leader capturing outsized profits in the consolidating analog semiconductor industry.

Related Link: Barron's Picks And Pans: Nike, Altaba, Viacom And More ______ Image Credit: By Mang9 - Own work, CC BY-SA 3.0, via Wikimedia Commons