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Qualcomm: Buy It For The Dividend, Hold It For The Long-Term Potential

May 01, 2020 5:24 PM ETQUALCOMM Incorporated (QCOM)24 Comments
The European View profile picture
The European View


  • Qualcomm beats revenue and profit estimates for the second quarter. Therefore, COVID-19 does not necessarily lead to the end of the world.
  • The launch of new 5G products has already contributed to growth in the QCT segment, underscoring the strong foundation that Qualcomm has built.
  • Even if it still takes some time until the potential is realized, it is worthwhile at least to enjoy the dividend yield, which has meanwhile increased by 5 percent.


Qualcomm (NASDAQ:QCOM) exceeded its revenue target and profit estimates for the second quarter. With this, the tech company has delivered convincing figures, just like Alphabet (GOOGL) and Microsoft (MSFT) before and has shown that COVID-19 does not necessarily lead to the end of the world. Let's take a closer look at the numbers.

The second-quarter numbers have shown some light at the end of the COVID-19 tunnel

QCT Segment

The QCT segment that includes Qualcomm's broad portfolio of CDMA- and OFDMA-based technologies, including wireless devices and infrastructure integrated circuits, saw growth on a three-month as well as on a six-month basis. Only a little but not an important licensing business saw a small decline in the second quarter.

(Source: Latest filing)


Much more important is the licensing business in the QTL segment (do not confuse both). According to the company, QTL:

grants licenses or rights to use portions of our intellectual property portfolio that are essential to the manufacture and sale of certain wireless products. Providing access to our leading intellectual property portfolio for wireless technology has been a catalyst for industry growth".

The QTL business shrank by USD 50 million in the second quarter but met the midpoint of the company's guidance.

(Source: Latest filing)

The main reason for the decline in revenue was COVID-19 (what else?). I do not see the substance of the business threatened, however. You can see from the earnings call that demand in China increased sharply again at the end of the second quarter, which is excellent news.

First, pronounced weakness in China in late January and February, followed by a substantial recovery exiting the quarter. And second a decline in demand in many other regions globally starting in March. This negative impact on QTL was partially offset by a benefit related to updates to previous

This article was written by

The European View profile picture
Runner of the TEV Blog | Private InvestorI am a long-term oriented investor and in my early thirties. I hold a law degree and a doctorate in law and love investing and talking about my and others' investments. I regularly write about my research and investments on various investor platforms and the TEV Blog. **My articles represent my opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions.**

Analyst’s Disclosure: I am/we are 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (24)

The price of Qualcomm will definitely vary with the Coronavirus upon us but, it is still a buy and hold stock. When all is said and done, you might end up paying far more. Let the dividend work until such a time.
Bought in the low 50s 4 years ago and add to it every time price collapses. 5G leader and eventual 6G pioneer, hopeful for more dividend growth, but never ending controversy. Has become a top 10 position in the portfolio. Expecting $200B mkt cap and $4.00/shr dividend by 2030
Great technology, way too much debt.
Not sure you’ve read the B/s properly. I make in net debt of $6bn
They have hardly any debt.
SP A-, quick ratio 1.61, current ratio 1.76; debt seems scaled conservatively within QCOM's balance sheet.
stan11 profile picture
Thanks @The European View . Great article and ideas worthy of further research. A bit overvalued here and hold. A good buy at about $60.
QCOM was valued at a market cap of $117B by Broadcom when 1) It was still fighting with Apple and 2) 5G was not in play. Now with both of these factors settled in its favor, it is trading at a market cap of $85B. Their M&A offered value of $117B marks a floor on valuation. With 5G, the current pricing is an attractive entry point
quick thought @TMFfan - not saying you are wrong, but that valuation was at a different point in time by one company. Who is to say Broadcom was not overpaying? The statement as it stands acts as though that was FV, when maybe it wasn't. Don't get me wrong, I have 1,000 shares so I want that valuation. But just because one company offered that, does not make it so.

But I do like the rational for it trading much higher. I just think the market is going lower and low tide lowers all boats. But it will sail on higher seas at some point. I don't think there should be a rush to buy. I think market is going lower. It should, but yes I know it doesn't always do what it should. The Fed is protecting it, but 30M unemployed and many businesses will operate at lower than full capacity for some time, assuming they don't go bankrupt first. So the general market will put downward pressure on stocks. The pop we had from the lows was nice but not deserved. Economy continues to get worse. Now a vaccine changes all that. That is why I don't think anyone should be in all cash, as who knows when that vaccine will discovered. Even then it will be some time before implemented, but the market wont care as it is future looking.

I am looking to add more shares of this outstanding company. Definitely a long term hold. Thanks for reminding us of what can be.
@kevn1111 imo QCOM has unique assets which are the future building blocks of society. Their technology is superior (Apple chose them over Intel) and their IP is a strong MOAT and they pay Dividends and they dominate mobile and 5G. They are in pole position to cash in. This is the time to get in for multiple bags
Adventureworldwide profile picture
Agree @TMFfan I believe we will see extensive 5G ramifications to the upside.
was at over a 4% divi, then market rallied over absurd optimism. I do have some shares, 1,000 shares, but would like to ramp up to 2,000. Was about to add right before the rally. Still expect lower prices overall for the market. Too much economic destruction...but the Fed has softened that so anything below $70 will be great for the long term. So another 8.5% lower ($6) and I think this would be great buy. I like @chicagotim1 price of $65. So if market is going down hard it could get there if a bit of fear hits.

Overall, until there is a vaccine, the economy will not be as robust and unemployment will remain extremely high. So being anywhere near 10% of prior highs is too high. In the interim the market should be low. But $QCOM is top notch quality and should be in everyones portfolio, imo.
Good article.
Just a few question.

Given the number of US unemployed, does that impact the pricing of 5G handsets and QCOM stock price ?

What is the value/impact of a positive outcome for the FTC appeal, or is it already priced into the stock in your opinion ?

Good Luck !
Thanks for the article, I appreciate the point of view.

I have a small position in QCOM; would love to add at $65 or so.

Best of luck to all.
By the nature of their products, expecting covid-19 to only get them more sales of the enabling technology.
farmed out profile picture
In many ways, QCOM's chips are part of the infrastructure of ordinary life, so that even though we have this economy-killer COVID-19, the company does just fine.
QCOM is a buy for 5G
BuddhaLove profile picture
Bought it in the 60’s a month or so back. Its a long for sure.
Then don't buy it. Resistance against 5G is building up. Even if this does not make sense this is a growing risk.
@omertens Heard that during 3G and then 4G take off
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