"People gather bundles of sticks to build bridges they never cross. " ~Author Unknown
Well, it appears the one day dip in the market on concerns around Ukraine is over and investors can get back to the business of investing. To that end, one of the core positions in my growth portfolio decided it was a good time this morning to give its shareholders some good news.
Qualcomm (NASDAQ:QCOM) came out today stating it was going to accelerate two measures to reward its stockholders. The mobile chip giant announced that it is raising dividend by 20%. The company is also upping its stock repurchase program by $5B to a total of $7.8B. Qualcomm has already bought back $2B in shares so far in 2014.
With the dividend hike, the shares will now yield a respectable 2.3%. Qualcomm raised its dividend payout by 40% around this time last year. Over the past eight years, the company has more than quadrupled its dividend.
With the new buyback authorization, the company would retire ~6% of its total float at current prices. The company certainly has the means to provide shareholders with greater rewards as it has more than $15B in net cash on its balance sheet.
These new measures just enhance the investment case for Qualcomm. The company is selling at a discount to the overall market as it is. The overall market multiple is currently around 15x forward earnings. Qualcomm goes for ~13x forward earnings. Earnings should post Y/Y gains of 10% to 12% in both FY2014 and FY2015, according to the current consensus.
In addition, revenue growth for the S&P 500 is projected to post 4% Y/Y gains this year. Qualcomm is seeing annual sales growth in the 7% to 10% range, and the stock has a five year projected PEG of under 1 (.96).
The company is a core part of what I call my "growth at a reasonable price" portfolio. It is also a good proxy for the overall growth of mobile and wireless computing. Its chips power smartphones, laptops, tablets and a variety of other mobile devices.
S&P has its highest rating "Strong Buy" on QCOM with a $92 price target. In the more tepid market environment of 2014, the shares provide solid value. The company has a fortress balance sheet, solid growth prospects, is committed to rewarding its shareholders and the stock is selling at reasonable valuations. This morning's announcements just made the shares more appealing. ACCUMULATE
Disclosure: I am long QCOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.