Chip stocks have surged in popularity over the past few years, delivering impressive returns for many investors. However, most of these stocks do not provide dividends to their shareholders. Fortunately, some companies within this sector do offer dividend income. Below are three such firms worth considering.
Top Dividend-Paying Companies in the Chip Industry
Texas Instruments: A Solid Option for Dividend Seekers
First on the list is Texas Instruments (NASDAQ: TXN). The integrated device manufacturer (IDM) has a forecasted dividend yield of 2.7% for the next 12 months. While this may not seem extraordinary, it surpasses the average yield of 0.6% found in other U.S. chip stocks. As an IDM, Texas Instruments designs and produces its own chips.
The company specializes in analog chips, which convert real-world inputs like sound or temperature into digital signals. In 2023, analog chips accounted for 74% of its revenue. The largest markets for these chips are industrial and automotive, making up 50% and 34% of total sales, respectively.
Texas Instruments also operates in “embedded processing,” focusing on executing software commands rather than interpreting real-world signals. The company achieved a notable 32% operating margin in the last quarter, one of the highest among U.S. semiconductor firms. Interestingly, despite a slowdown in sector activity, Texas Instruments’ stock has risen 18% this year. However, revenues fell nearly 16% last quarter, with a projected 25% drop in earnings over the next year, creating manageable expectations for future performance.
Qualcomm: A Noteworthy Dividend Yield
Next is Qualcomm (NASDAQ: QCOM), which boasts a forecasted dividend yield of over 2%. While this yield is modest, it significantly exceeds the 0.03% yield offered by NVIDIA (NASDAQ: NVDA). Qualcomm focuses on designing chips for mobile devices and laptops and operates as a fabless chip designer, meaning it does not manufacture its own products.
The company’s Snapdragon chips are prevalent in Android smartphones and Windows laptops, with mobile devices contributing 63% to Qualcomm’s revenues in 2023. The remaining income is largely derived from the Internet of Things (IoT) and licensing.
Qualcomm holds an extensive patent library, having received the second-most patents issued in the U.S. in 2023. This licensing segment is particularly lucrative, achieving an earnings before taxes (EBT) margin of 68%. Analysts are optimistic about Qualcomm, projecting an average price target of $217, indicating a potential 30% increase from current levels.
Broadcom: A Commitment to Dividends
Finally, we have Broadcom (NASDAQ: AVGO), which offers a dividend yield of 1.3%, the lowest among this group yet still respectable. Broadcom is known for its specialized application-specific integrated circuits (ASICs), which excel in speed and energy efficiency for specific tasks, unlike general-purpose graphics processing units (GPUs).
This fabless company has performed remarkably well in 2024, with its stock price rising nearly 57%, placing it among the top five U.S. semiconductor firms. Broadcom’s financial metrics are impressive, with a 76% gross margin last quarter, exceeding NVIDIA’s, and a 32% operating margin, trailing only Texas Instruments.
Expectations remain high for Broadcom, with forecasts predicting a 44% revenue increase and a 15% boost in earnings per share (EPS) over the next year. Analysts are keenly watching to see if the company can meet or exceed these ambitious projections.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
