✍️ Article:
🧠 Executive Summary
Texas Instruments (NASDAQ: TXN), a stalwart in the semiconductor industry with over 52 consecutive years of dividend payments, is currently navigating a complex dividend landscape. Despite a robust dividend growth trajectory (5-year CAGR: 8.6%), a Dividend Resilience Score (DRS) of just 17.58 (“At Risk”) and a payout ratio exceeding 100% suggest short-term challenges to payout sustainability. With a yield of 0.73%, TXN also lags the industry average of 1.67%, making reinvestment less compelling for income investors.
📖 Narrative Summary
Texas Instruments stands tall as a legacy dividend payer, with a multi-decade record of consistency and gradual increases. As of Q4 2024, the company maintained:
- Annual dividend: $6.68
- Recent quarterly payout: $1.36
- 52.8 years of continuous payment
- 5-year dividend growth: 8.6%
However, below the surface, free cash flow ($806M) fell short of dividends paid ($1.24B), generating a coverage ratio of just 0.65. Combined with a 102.9% payout ratio and rising insider sell activity (Q4 sell volume: 2.6M shares), this hints at dividend stress beneath the headline stability.
📉 Reinvestment Signal: ❌ Avoid
TXN’s dividend profile currently flashes red for reinvestors:
- Reinvestment Signal: Avoid
- Rationale: Coverage and sustainability metrics have deteriorated.
- Conditions Met: None—FCF and earnings fail to cover payouts.
- Strategic Guidance: Investors should collect the dividend, but avoid DRIP strategies until payout ratios normalize and free cash flow strengthens.
🔍 Dividend Resilience Score (DRS): 17.58 – “At Risk”
| Component | Score (out of 100) |
|---|---|
| Payout Ratio Risk | 0 |
| FCF Dividend Coverage | 0 |
| Cash Ratio | 17.2 |
| Debt to Equity | 100 |
| Interest Coverage | 0 |
Despite a solid balance sheet and cash holdings of $3.2B, coverage-based stress and high leverage heavily impair the dividend’s resilience score.
⚖️ Scoring Breakdown
| Factor | TXN Score | Peer Avg |
|---|---|---|
| Dividend Health | 14 | — |
| Financial Health | 15 | — |
| Business Fundamentals | 10 | — |
| Insider Sentiment | 2 | — |
| Risk Factors | 3 | — |
| Market Context | 5 | — |
| Growth Potential | 5 | — |
| Total Score | 54 | 49.22 |
TXN performs slightly above peer average, but this is buoyed by historical consistency—not current cash efficiency.
📊 Peer Yield Snapshot
| Company | Yield (%) | Score |
|---|---|---|
| QCOM | 2.91 | 52 |
| MCHP | 3.85 | 48 |
| NXPI | 2.10 | 50 |
| ADI | 1.92 | 47 |
| TXN | 0.73 | 54 |
TXN’s score is competitive, but its dividend yield ranks near the bottom, weakening its position in income portfolios.
🧭 Strategic Insights for Investors
✅ For Income-Focused Investors:
- TXN’s sub-1% yield and high payout ratio suggest better opportunities in peers like MCHP, QCOM, or NXPI.
- Avoid reinvestment unless dividend coverage improves.
⚠️ For Long-Term Growth Dividend Investors:
- Consider holding TXN for long-term capital growth and future dividend restoration.
- Watch insider sentiment and free cash flow trend reversals.
📌 Key Signals to Monitor:
- FCF improvement above $1.2B
- Payout ratio decline below 80%
- Sustained insider net buying
- Cash ratio stabilization above 0.30
🧾 Final Verdict
Dividend Status: ⚠️ At Risk
Reinvestment Signal: ❌ Avoid
Yield Position: ⬇️ Below industry
Investor Action: Hold for legacy strength, avoid reinvestment for now
