As Texas Instruments (TXN) missed earnings and guided future estimates downward, I wanted to examine a few more of the broad line semiconductor companies from an income standpoint rather than that of an earnings standpoint, even though good EPS track records should always be considered. The reason I note that EPS trends should be used as a secondary variable is simple. When a company misses, and guides downward for future quarters they tend to get downgraded in the short term and have their price targets cut as was the case with TXN on Tuesday.
I strongly believe that the broad line semiconductor sector has both great growth potential and should be considered a great starting point for income based investors. That said I've established the following criteria for this screen:
- Minimum Profit Margin Must Be At Least 6.00%
- Minimum Return On Equity (ROE) Must Be At Least 4.50%
- Minimum Dividend Yield Must Be At Least 3.00%
Cypress Semiconductor Corp. (CY) - Shares of CY are trading in a 52-week range of $10.46/share (52-week low) and $21.99/share (52-week high), and currently yield 4.10% ($0.44) on an annual basis, which is paid out on a quarterly basis at a rate of $0.11/share. That said there are several reasons to like CY at current levels. First, the company announced it has made its 'Envirosystems' portfolio available to Federal, State and Local governments through the GSA's Federal Supply Schedule, which should certainly enhance sales as well as contribute nicely to the company's bottom line. Second, the company has surpassed earnings estimates in three of the last four quarters, and remained in-line during the fourth and most recently reported quarter which was June 2012. Lastly, CY carries a Profit Margin of 6.42% over the last twelve months, as well as a Return on Equity of 11.68% over the same period.
Intersil Corp. (ISIL) - Shares of ISIL are trading in a 52-week range of $9.70/share (52-week low) and $12.97/share (52-week high), and currently yield 4.80% ($0.48) on an annual basis, which is paid out on a quarterly basis at a rate of $0.12/share since February 2008. That said there are a few reasons to like ISIL at current levels. First, the company announced the development of the industry's first RS-485 transceiver to operate at 1.8 volts which could bode very well for company in terms of future sales and the possibility of a patent. Second, the company has a few fundamentals investors should examine a bit closer. The company's Profit Margin of 6.93%, Return on Assets of 2.40% and Return on Equity of 4.68% are all very decent numbers, however any significant change to the upside over the next twelve months could boost the stock. Lastly, and probably the most attractive quality is the company's yield of 4.8%, which is the highest of the four companies screened.
Intel Corp. (INTC) - Shares of INTC are trading in a 52-week range of $19.16/share (52-week low) and $29.27/share (52-week high), and currently yield 3.30% ($0.84) on an annual basis, which is paid out on a quarterly basis at a rate of $0.21/share since February 2008. That said there are a few reasons to like INTC at current levels. First, the company has surpassed earnings estimates in each of the last four quarters by an average 5.32% and should continue surpass estimates over the next few quarters. Second, the company has several fundamentals that act as a great foundation especially when compared to the other companies referenced by the screen. The company's Profit Margin of 22.73% is fantastic and the company's Return on Equity of 25.42% is also pretty good when compared against the others in the group. Lastly, the company is currently trading near $25/share which represents a 6.8% discount to the company's current 200-day moving average.