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Summary

  • On Tuesday, April 8, Qualcomm announced that it was increasing its quarterly dividend by 20% or $0.07/share.
  • Comparative Forward P/E ratios set Qualcomm apart from a number of its peers.
  • Recent trend behavior signals a buying mode for most long-term investors.

When a company announces the increase of its quarterly dividend, potential income-driven investors tend to be a bit more interested as to what may be going on with that particular company. With that said, I not only wanted to examine the most recent dividend increase by Qualcomm (NASDAQ:QCOM), but also highlight a number of reasons behind my decision to remain bullish on shares of this particular communications play.

Company Overview

With its operations based in San Diego, California, QUALCOMM Incorporated designs, develops, manufactures, and markets digital communications products and services based on code division multiple access (also known as CDMA), orthogonal frequency division multiple access (also known as OFDMA), and other technologies. It operates in four segments: Qualcomm CDMA Technologies (also known as QCT), Qualcomm Technology Licensing (also known as QTL), Qualcomm Wireless & Internet (also known as QWI), and Qualcomm Strategic Initiatives (also known as QSI).

Qualcomm Increases Its Quarterly Dividend 20%

On Tuesday, April 8, Qualcomm announced a quarterly dividend increase of $0.07/share which brings its upcoming dividend payout to $0.42/share. It should be noted that the increase will be paid on June 25 for shareholders of record on June 4. Not only does this boost represent a 20% increase from its prior dividend of $0.35/share (paid on March 26), it was also slightly lower than its previous increase of $0.10/share that was announced on April 9, 2013.

Qualcomm Has Demonstrated Solid Dividend Growth Over The Past 5 Years

Since February 25, 2009, the company has increased its quarterly distribution six times over the past 60 months (including the company's most recent increase that was announced on April 8) which translates into an average annual dividend growth rate over that particular period of approximately 29.4%. From an income perspective, the company's forward yield of 2.15% ($1.68) coupled with its 5-year dividend behavior certainly make this particular stock a very viable income option for long-term investors in search of a moderately- yielding telecom play.

Recent Performance & Trend Behavior

On Tuesday, shares of QCOM, which currently possess a market cap of $133.41 billion, a forward P/E ratio of 13.83, and a dividend yield of 2.15% ($1.68), settled at a price of $78.89/share.

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Based on their closing price of $78.89/shares, shares of QCOM are trading 1.09% above their 20-day simple moving average, 3.87% above their 50-day simple moving average, and 13.03% above their 200-day simple moving average. It should be noted that these numbers indicate a short-term and mid-to-long term uptrend for the stock, which generally translates into a buying mode for most near-term traders and many long-term investors.

Comparative Forward P/E Ratios Set Qualcomm Apart From Its Peers

Although the above referenced numbers indicate a long-term uptrend for the company's stock, I actually think its share price of $78.89/share offers investors a considerable point of entry. Why? Well, I think that when shares are trading at a much better forward P/E ratio than their sector-based peers, a great buying opportunity is created for most long-term investors.

As of Tuesday's close, Qualcomm's forward P/E ratio of 13.83 was much lower than the forward P/E ratio of both Nokia (NYSE:NOK) (forward P/E ratio of 21.97 as of 4/8) and Alcatel-Lucent (NYSE:ALU) (forward P/E ratio of 18.71 as of 4/8), which signals a greater level of affordability for those who may be looking to establish a position in Qualcomm, especially when compared to a number of its peers.

A Look Ahead To Qualcomm's Upcoming Earnings

When it comes to the company's upcoming earnings, there are a number of things potential investors should consider. For example, analysts are currently calling for QCOM to earn $1.22/share in terms of EPS for its FQ2 earnings that are due out on April 23 (which is $0.04/share lower than what the company had reported during FQ1 2013 and $0.05/share higher than the company had reported during the year ago period).

In order to meet and or exceed its quarterly EPS estimates, I'd like to see an increase in the company's operating income (within the range of at least +3% on the low side and +6% or more on the high side), a fair increase in the company's net income (within the range of 2% on the low side and 3.5% or more on the high side), and lastly an increase in MSM chip shipments (in this instance I'm looking for at least 140 million on the low side and an increase of 185 million or more on the high side). If the above mentioned criteria is met and or exceeded, there's a very good chance that current EPS estimates could met and/or surpassed.

Conclusion

For those of you who may be considering a position in Qualcomm, I strongly recommend keeping a close eye on the company's recent trend performance, its ability to continue to maintain its dividend, and its ability to continue to enhance shareholder value over the next 12-24 months, as each of these factors could play a role in the company's long-term growth.

Source: As Qualcomm Ups Its Dividend By 20%, Here's Why I Like The Stock