We recently compiled a list of the 15 highest dividend stocks, and in this article we’ll look at how Texas Instruments Incorporated (NASDAQ:TXN) stands up against other dividend stocks.
In 2023, dividend stocks underperformed compared to the overall market, which was driven primarily by tech stocks. Entering the second half of 2024, dividend stocks are showing a similar performance trend to the first half of the year. The Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend increases, is down 0.17% year-to-date, while the overall market is up about 18%. There are two main reasons dividend stocks are falling. First, high interest rates are drawing investors to bonds. Second, the current surge in AI technology is drawing investor attention to tech stocks. The tech-heavy NASDAQ hit an all-time high this year and has soared more than 25% so far in 2024. That said, investors haven’t completely lost faith in dividend stocks. After all, it’s important to play the long game to make a successful investment. Dividend stocks have been consistently profitable, accounting for 36% of the overall market’s returns since 1927. Bank of America has also declared 2024 a “dividend year.”
In dividend investing, dividend growth stocks often lead the way for high-yield stocks. Recent research has shown that companies that offer consistent, sustainable dividends without excessive dividends deliver the best long-term returns. Wellington Management conducted a study to classify dividend-paying companies into five groups based on the level of their dividends. Since 1930, the study found that stocks with the highest dividends have generally performed similarly to stocks with high but not the highest dividends, although the rankings of top performers have frequently switched over the decades.
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10 Stocks with Extremely High Dividend Yields and Rising Potential
Dividend growth strategies have become very visible in the last few years, with many companies in the United States steadily increasing their dividends. Dividends hit a record high in 2023 and have been increasing consistently since then. Analysts are very optimistic about dividends in 2024, and recent forecasts have companies hitting this new record target. One of the main reasons for this increase is that many companies, especially the big technology companies, have ample cash reserves and are rapidly increasing their free cash flow. This strong financial position allows the companies to continue to reward investors with higher dividends. According to the latest report from S&P Dow Jones Indices, companies included in the index paid $153.4 billion in dividends in the second quarter of 2024. This is up from $151.6 billion in the previous quarter and $143.2 billion in the same period last year. The report also noted that 539 dividend increases were reported, an increase of 17.2% compared to 460 in the same period last year. The total value of these dividend increases reached $20.4 billion in the current quarter, up from $9.8 billion in the second quarter of 2023.
The story continues
Dividend growth stocks are popular with investors because they have solid businesses, steady cash flows, and strong balance sheets. These companies are the best for generating passive income. In this article, we’ll look at some of the best dividend stocks to buy.
Our methodology:
To compile this list, we thoroughly researched trusted sources such as Forbes, Morningstar, Barron’s, and Business Insider. From their latest articles, we collected the stocks that they collectively like. In addition, we used Insider Monkey’s Q1 2024 database to evaluate hedge fund sentiment towards each stock. The stocks are ordered in ascending order based on the number of hedge funds that hold shares of these companies. Why are you interested in stocks that hedge funds are flooding? The reason is simple. Our research shows that you can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks every quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points. (Learn more).
Robotic arms assembling complex circuit boards, a glimpse into the company’s industrial-scale operations.
Texas Instruments Incorporated (NASDAQ:TXN)
Number of hedge fund holders: 49
Texas Instruments Incorporated (NASDAQ:TXN), an American multinational semiconductor company, ranks 13th on the list of best dividend stocks. The semiconductor industry is cyclical and, except for the high-performance AI chip sector, has been in a slump over the past year. Additionally, semiconductor inventories declined slightly in the first quarter of 2024, but are at or near 20-year highs for industrial, automotive, consumer, and communications parts. Street analysts believe these market conditions will pose short-term challenges for the company. In the long term, it is viewed as a solid business worth investing in. Since the beginning of 2024, the stock has surged nearly 20% and is up 10.5% over the past year.
Continued challenges in the semiconductor industry led Texas Instruments Inc. (NASDAQ:TXN) to report first-quarter 2024 sales of $3.66 billion, down 16% year over year. However, it beat analysts’ expectations by $50 million. The company reported declines in operating income in two of its three segments. Management has suggested that it is strategically investing in manufacturing capacity to address these challenges, aiming to establish a solid foundation for future recovery and growth. This effort is reflected in the company’s notable increase in capital expenditures. Over the past 12 months, the company has invested $3.7 billion in research and development and $5.3 billion in capital expenditures.
These moves have impacted Texas Instruments’ (NASDAQ:TXN) cash flow generation. In the first quarter of 2024, the company generated $6.3 billion in operating cash flow, with free cash flow of $940 million in the same period. Free cash flow represented just 5.6% of revenue. The company also remains committed to returning value to shareholders, distributing $4.6 billion to investors through dividends, up from $4.3 billion in the same period last year.
Texas Instruments Incorporated (NASDAQ:TXN) is one of the best stocks for dividends thanks to its cash flow generation and shareholder returns. Additionally, the company has been increasing its dividends for the past 12 years. It currently pays a quarterly dividend of $1.30 per share, with a dividend yield of 2.56% as of July 15th.
As of the end of the first quarter of 2024, 49 hedge funds in Insider Monkey’s database held shares in Texas Instruments Incorporated (NASDAQ:TXN), down from 55 in the previous quarter. These shares are valued at over $2.4 billion. First Eagle Investment Management, with over 4.2 million shares, was the company’s largest shareholder in the first quarter.
Overall, TXN ranks #13 on our list of best dividend stocks to buy. To see other dividend stocks that hedge funds are watching, see “The 15 Best Stocks for Dividends.” While we acknowledge TXN’s potential as an investment, we believe some significantly undervalued dividend stocks have a better chance of delivering higher returns in a shorter period of time. If you’re looking for a significantly undervalued dividend stock that shows more promise than TXN but is trading at less than 7 times price and yielding almost 10%, check out this report on very cheap dividend stocks.
Next: Analysts Predict New $25 Billion “Opportunity” for NVIDIA, 10 Best-of-Breed Stocks to Buy in Q3 2024 According to Bank of America.
Disclosures: None. This article was originally published on Insider Monkey.