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Live Off Dividends

๐——๐—ผ ๐˜†๐—ผ๐˜‚ ๐˜„๐—ฎ๐—ป๐˜ ๐˜๐—ผ ๐—ฏ๐˜‚๐˜† ๐—ง๐—ซ๐—ก ๐—ฟ๐—ถ๐—ด๐—ต๐˜ ๐—ป๐—ผ๐˜„? ๐—ง๐—ต๐—ถ๐—ป๐—ธ ๐˜๐˜„๐—ถ๐—ฐ๐—ฒ...

Updated: Jan 26

๐—ช๐—ต๐—ฎ๐˜ ๐˜†๐—ผ๐˜‚ ๐˜€๐—ต๐—ผ๐˜‚๐—น๐—ฑ ๐—ธ๐—ป๐—ผ๐˜„ ๐—ฎ๐—ฏ๐—ผ๐˜‚๐˜ ๐—ง๐—ซ๐—ก? ๐Ÿ’ก


Have you ever heard about $INTC (Intel) or $NVDA (NVIDIA Corporation)?

Perhaps you have these on your computer? ๐Ÿ’ป


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.


๐— ๐—ฎ๐—ฟ๐—ธ๐—ฒ๐˜ ๐—–๐—”๐—ฃ: $178b ๐—™๐—ผ๐˜‚๐—ป๐—ฑ๐—ฒ๐—ฑ: 1930


๐—ช๐—ต๐—ฎ๐˜โ€™๐˜€ ๐˜๐—ต๐—ฒ ๐—ฐ๐—ฎ๐˜๐—ฐ๐—ต ๐—ฎ๐—ฏ๐—ผ๐˜‚๐˜ ๐˜๐—ต๐—ถ๐˜€ ๐—ฐ๐—ผ๐—บ๐—ฝ๐—ฎ๐—ป๐˜†? ๐Ÿ“œ


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 $๐Ÿญ๐Ÿฐ.๐Ÿฐ๐Ÿฒ ๐—ฏ๐—ถ๐—น๐—น๐—ถ๐—ผ๐—ป ๐—ถ๐—ป ๐—ฟ๐—ฒ๐˜ƒ๐—ฒ๐—ป๐˜‚๐—ฒ ๐—ถ๐—ป ๐Ÿฎ๐Ÿฌ๐Ÿฎ๐Ÿฌ. 75% of this amount they made from analog products like sensors and temperature/pressure devices which will be needed in the future for 5G.


๐—™๐—ฟ๐—ผ๐—บ ๐—ฎ ๐—ด๐—ฟ๐—ผ๐˜„๐˜๐—ต ๐˜€๐˜๐—ฎ๐—ป๐—ฑ๐—ฝ๐—ผ๐—ถ๐—ป๐˜โ€ฆ ๐Ÿ’น


Over the last 5 years, the company was able to grow 11.6% every year but the future growth doesnโ€™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.


๐˜›๐˜ฉ๐˜ฆ ๐˜ฐ๐˜ฏ๐˜ญ๐˜บ๐˜จ๐˜ฐ๐˜ฐ๐˜ฅ ๐˜ธ๐˜ฉ๐˜ข๐˜ต ๐˜ ๐˜ญ๐˜ช๐˜ฌ๐˜ฆ ๐˜ข๐˜ฃ๐˜ฐ๐˜ถ๐˜ต ๐˜ต๐˜ฉ๐˜ช๐˜ด ๐˜ค๐˜ฐ๐˜ฎ๐˜ฑ๐˜ข๐˜ฏ๐˜บ ๐˜ช๐˜ดโ€ฆ ๐Ÿ”


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 doesnโ€™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.


๐˜ž๐˜ฉ๐˜ข๐˜ตโ€™๐˜ด ๐˜ข๐˜ฃ๐˜ฐ๐˜ถ๐˜ต ๐˜ต๐˜ฉ๐˜ฆ ๐˜ง๐˜ถ๐˜ต๐˜ถ๐˜ณ๐˜ฆ ๐˜ฅ๐˜ช๐˜ท๐˜ช๐˜ฅ๐˜ฆ๐˜ฏ๐˜ฅ ๐˜จ๐˜ณ๐˜ฐ๐˜ธ๐˜ต๐˜ฉ?


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.


๐—ฉ๐—ฎ๐—น๐˜‚๐—ฎ๐˜๐—ถ๐—ผ๐—ป ๐—ฎ๐—ป๐—ฑ ๐—™๐—ฎ๐—ถ๐—ฟ ๐—ฉ๐—ฎ๐—น๐˜‚๐—ฒ โš–


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 doesnโ€™t look good. Compare with the industry average(4.5x) it is more than three times bigger.


๐—ง๐˜„๐—ผ ๐—ฏ๐—ถ๐—ด ๐—ป๐—ฒ๐—ด๐—ฎ๐˜๐—ถ๐˜ƒ๐—ฒ ๐—ฝ๐—ผ๐—ถ๐—ป๐˜๐˜€โ€ฆ โŒ


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.


๐—ข๐˜ƒ๐—ฒ๐—ฟ๐—ฎ๐—น๐—น ๐—ฎ๐—ป๐—ฑ ๐—บ๐˜† ๐˜๐—ฎ๐—ธ๐—ฒ ๐—ฎ๐˜„๐—ฎ๐˜†โ€ฆ ๐Ÿ’ฐ


I think TXN is a strong company and they can maintain their position in the market but I wouldnโ€™t buy it right now.

Iโ€™m a long-term investor but as many big names said already โ€œYou make your money when you buy, not when you sell.โ€


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.



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