𝗪𝗵𝗮𝘁 𝘆𝗼𝘂 𝘀𝗵𝗼𝘂𝗹𝗱 𝗸𝗻𝗼𝘄 𝗮𝗯𝗼𝘂𝘁 𝗧𝗫𝗡? 💡
Have you ever heard about $INTC (Intel) or $NVDA (NVIDIA Corporation)?
Perhaps you have these on your computer? 💻
Then you have to take a look with me into $TXN (Texas Instruments Inc) . This company design manufactures and sells semiconductors to electronics designers and manufacturers worldwide. Currently in a world where we have a high demand for batteries and chips this company has a big upside into the future.
𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗔𝗣: $178b 𝗙𝗼𝘂𝗻𝗱𝗲𝗱: 1930
𝗪𝗵𝗮𝘁’𝘀 𝘁𝗵𝗲 𝗰𝗮𝘁𝗰𝗵 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗶𝘀 𝗰𝗼𝗺𝗽𝗮𝗻𝘆? 📜
The CEO acts like an owner. As of their last report, the main goal is to maximize their free cash flow which is what we are looking for as an investor.
Sticky products and custom software. In this way, the customer will come back for their products over and over again. They generated $𝟭𝟰.𝟰𝟲 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝗶𝗻 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝗶𝗻 𝟮𝟬𝟮𝟬. 75% of this amount they made from analog products like sensors and temperature/pressure devices which will be needed in the future for 5G.
𝗙𝗿𝗼𝗺 𝗮 𝗴𝗿𝗼𝘄𝘁𝗵 𝘀𝘁𝗮𝗻𝗱𝗽𝗼𝗶𝗻𝘁… 💹
Over the last 5 years, the company was able to grow 11.6% every year but the future growth doesn’t look that shiny as you might expect. It will grow but not significantly. Only 3.2% growth is expected based on 30 analysts' reports.
𝘛𝘩𝘦 𝘰𝘯𝘭𝘺𝘨𝘰𝘰𝘥 𝘸𝘩𝘢𝘵 𝘐 𝘭𝘪𝘬𝘦 𝘢𝘣𝘰𝘶𝘵 𝘵𝘩𝘪𝘴 𝘤𝘰𝘮𝘱𝘢𝘯𝘺 𝘪𝘴… 🔝
The company pays right now a 2.38% dividend which is better than the $SPX500 but I like companies with a higher yield. Currently, it doesn’t have the best yield compared to the past but unfortunately, this is the average in this industry. 18 years record of dividend-paying and increasing. The payout ratio is very good; I like to see payout ratios under 75% so that this company has only a 55% payout ratio is a win for me.
𝘞𝘩𝘢𝘵’𝘴 𝘢𝘣𝘰𝘶𝘵 𝘵𝘩𝘦 𝘧𝘶𝘵𝘶𝘳𝘦 𝘥𝘪𝘷𝘪𝘥𝘦𝘯𝘥 𝘨𝘳𝘰𝘸𝘵𝘩?
What I can calculate from the past dividend growth, the company will and want to increase their dividend by around 19.4% every year which sounds very good. Another very good point is that they are buying shares back in every year. Almost from all of the operations cashflow, they are buying shares back which is good and I want to see you as an investor.
𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗙𝗮𝗶𝗿 𝗩𝗮𝗹𝘂𝗲 ⚖
The PE ratio is 26.6 which seems to be high but at the same time, it is lower than the average in this industry. After I made my calculation the Fair price is around $160 which brings me to the point that right now the stock price is 20% overvalued. Price to book ratio is one of my key factors when I take a deep dive into a company and unfortunately, this also doesn’t look good. Compare with the industry average(4.5x) it is more than three times bigger.
𝗧𝘄𝗼 𝗯𝗶𝗴 𝗻𝗲𝗴𝗮𝘁𝗶𝘃𝗲 𝗽𝗼𝗶𝗻𝘁𝘀… ❌
The company has a high level of debt. They are issuing about a billion dollars more debt every year than they are paying down. As of the second quarter of 2021, the Debt/Equity ratio was 56%. Another negative point is that TXN insiders have only sold shares in the past 3 months.
𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝗮𝗻𝗱 𝗺𝘆 𝘁𝗮𝗸𝗲 𝗮𝘄𝗮𝘆… 💰
I think TXN is a strong company and they can maintain their position in the market but I wouldn’t buy it right now.
I’m a long-term investor but as many big names said already “You make your money when you buy, not when you sell.”
Currently, the share price is overrated, I would consider buying the stock below $150; mid-low dividend yield and I like to see yearly growth rates around 7-9%. But, if you want to keep your money safe, and have a steady dividend income, not to lose one penny, then TXN might be your choice in this industry.
Thanks for reading and feel free to share your thoughts in the comments section.
