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What Are The Top Eleven Dividend Yielding S&P 500 Semiconductor Stocks?

|About: Analog Devices, Inc. (ADI), AMAT, AVGO, INTC, KLAC, LRCX, MCHP, NVDA, SWKS, TXN, XLNX
Summary

Rich dividend yields of the semiconductor companies being partly enhanced by the stock price loss.

Significant exposure of the stocks to China amidst trade war uncertainties.

Companies continue to witness growth in revenue, EPS and margins.

Companies opting for growth in dividends and share buybacks thanks to the tax reforms.

A Look At The Dividend Growth And Share BuyBack Plans Of The Stocks

Attractive dividend yields and profit margins characterize the S&P 500 semiconductor stocks. We will analyze the S&P 500 semiconductor stocks with positive dividend yields. Texas Instruments, Broadcom, Intel, and Microchip Technology under the semiconductor broadline industry have dividend yields in the range of 2.3% to 3.4%. KLA-Tencor, Lam Research and Applied Materials fall under the semiconductor equipment & materials industry with dividend yields ranging between 2.6% and 3.5%. Analog Devices, Xilinx and Skyworks Solutions come under semiconductor integrated circuits industry with dividend yields in the range of 1.8% and 2.4%. NVIDIA falls under the semiconductor specialized industry and has a dividend yield of 0.3%. The U.S. tax reforms have the potential to enhance the earnings figures of the U.S. companies provided they comply with the norms.

Sources: Companies, Exchanges, Finviz

However, the falling prices of the technology stocks have further complemented the impressive dividend yields. The chipmaker company stock prices have been affected by slower demand forecasts due to the tariff war concerns. The semiconductor stocks have significant exposure to China. The S&P 500 and Nasdaq Composite indexes got hammered as the borrowing costs started rising. There is also an impending U.S. mid-term election which will be of vital importance. All of which and weaker forecasts from Caterpillar and 3M led to cautions for weaker demand from Texas Instruments and STMicroelectronics. Amazon and Alphabet’s disappointing earnings results further impacted the technology stock prices.

Now let us look at the dividend growth and share buyback plans of the top eleven dividend-yielding S&P 500 semiconductor companies.

Semiconductor - Broad Line

Texas Instruments

In September 2018, Texas Instruments (TXN) announced the increase its quarterly dividend for the 15th successive year by 24% to $3.08 annualized. The company has returned $6.2 billion in the last 12 months via stock buybacks and dividends. Texas Instruments raised the share buyback authorizations by $12 billion.

Sources: Company, Morningstar

The company is a principal designer, manufacturer and seller of semiconductors to global electronics designers and manufacturers. The two reportable segments of the company are:

  • Analog, comprising of Power, Signal Chain and High-Volume product lines generating a revenue of $9.9 billion in fiscal 2017. The segment revenue was equivalent to 19% of the global analog semiconductor market worth $53 billion in fiscal 2017.
  • Embedded Processing, containing Connected Microcontrollers and Processors product lines generating a revenue of $3.5 billion in fiscal 2017. The segment constituted 18% of the worldwide embedded processor market worth $20 billion in fiscal 2017.

The company has significant revenue exposure to China. Texas Instruments had a 44% exposure to China in fiscal 2017 compared to 45% in fiscals 2016 and 2015. The fiscal years ended on December 31. Texas Instruments revenue has grown at a 5-year average of 3.1% to $15 billion in fiscal 2017. Earnings per share (EPS) improved at a 5-year average of 0.2% to $3.6 in fiscal 2017. The company had revenue of $12.1 billion growing by 8% YoY (year-over-year) in the nine months of fiscal 2018. EPS improved by 33% to $4.3.

Texas Instruments gross margin has improved from 52.1% in fiscal 2013 to 64.3% in fiscal 2017. Operating margin increased from 24.5% in fiscal 2013 to 43.3% in fiscal 2017. The net margin rose from 17.4% in fiscal 2013 to 24.4% in fiscal 2017.

Consensus estimates

The stock has lost 13.7% year-to-date (YTD). The revenue estimates of the stock are $16.1 billion and $16.7 billion for fiscal 2018 and 2019 respectively. Projected EPS are $5.7 and $6.2 for those years respectively. Texas Instruments has a forward PE ratio of 16.4x at present compared to 22.9x in fiscal 2017.

Nine, seven and thirteen analysts have assigned a "buy," "outperform" and "hold" recommendation to the stock. One analyst each have assigned a "underperform" and "sell" recommendation to the stock.

Broadcom

In December 2017, Broadcom (AVGO) announced a quarterly interim dividend increase of 72% to $7 annualized. The company has returned $8 billion via stock buybacks and dividend in the nine months of fiscal 2018. It plans to return 50% of the prior fiscal year free cash flow via dividends.

Sources: Company, Morningstar

Broadcom is a leading designer, developer, and supplier of semiconductor devices. The four reportable segments of the company include:

  • Wired infrastructure generated revenue of $8.5 billion in fiscal 2017 from acquired BRCM products and strong organic growth.
  • Wireless communications generated revenue of $5.4 billion in fiscal 2017 from strong demand for wireless content in handsets and BRCM products.
  • Enterprise storage generated revenue of $2.8 billion in fiscal 2017 due to higher demand for HDD products, SSD controller, server storage and connectivity products.
  • Industrial & other generated revenue of $0.9 billion in fiscal 2017.

Broadcom had a 54% revenue exposure to China in fiscals 2017, 2016 and 2015. The fiscal periods ended on October 29, 30 and November 1 respectively. The revenue has increased at a 5-year average of 49.5% to $17.6 billion in fiscal 2017. EPS grew at a 5-year average of 0.1% to $4. Revenue rose by 20% to $15.4 billion in the nine months ended fiscal 2018. EPS improved by 829% to $25.7 triggered by lower operating expenses and U.S. tax reforms of 2017.

The gross margin improved slightly from 47.5% in fiscal 2013 to 48.3% in fiscal 2017. Operating margin declined from 22% in fiscal 2013 to 15.1% in fiscal 2017. Net margin decreased from 21.9% in fiscal 2013 to 9.6% in fiscal 2017. The higher amortization of acquisition-related intangible assets, R&D and interest expenses led to the decline in the profit margins.

Consensus estimates

The leading chipmaker is under European Union antitrust inspection for exercising coercion towards customers for sale of its semiconductors. Broadcom agreed to acquire software maker CA for $19 billion to construct a significant global infrastructure technology company.

The stock has lost 17.7% YTD. Revenue forecasts for fiscal 2018 and 2019 are $20.9 billion and $21.5 billion respectively. EPS projections for the years are $20.6 and $21.4 respectively. Broad com has a forward PE ratio of 9.9x at present compared to 13.3x in fiscal 2017.

Thirteen, eleven and nine analysts have assigned a "buy," "outperform" and "hold" recommendation to the stock.

Intel

In March 2018, Intel (INTC) announced a 10% growth in its quarterly dividend which amounted to $1.2 on an annualized basis. Intel has returned $12.6 billion in the form of stock buybacks and dividends YTD. Intel was authorized to buy back up to $75.0 billion as of September 29, 2018.

Sources: Company, Morningstar

The company offers computing, networking, data storage and communications solutions across various industries. The reporting segments of the company are:

  • Client Computing Group, with a revenue of $34 billion in fiscal 2017. The section included the 8th generation Intel Core processor family and Intel Core i9 processors.
  • Data Center Group, with a revenue of $19.1 billion in fiscal 2017. The segment included platforms for computing, storage, and network functions.

The company had a 24% revenue exposure to China in fiscals 2017, 2016 and 21% in fiscal 2015. The fiscal years ended on December 30, 31 and 26 respectively. Revenue has grown at a 5-year average of 3.3% to $62.8 billion in fiscal 2017. EPS remained the same at $2 during the 5-year period. Revenue and EPS grew by 14% and 58% in the first half of fiscal 2018 to $52.2 billion and $3.4 respectively.

Gross margin improved from 59.8% in fiscal 2013 to 62.3% in fiscal 2017. Operating margin increased from 23.8% in fiscal 2013 to 29.2% in fiscal 2017. Net margin declined from 18.3% in fiscal 2013 to 15.3% in fiscal 2017. The decrease was due to the non-recurring impact of the U.S. tax reforms in 2017.

Consensus estimate

High-margin data center business and robust demand for PC chips helped the company surpass the revenue and earnings estimates for the third quarter of fiscal 2018 offset by trade war concerns. The stock has lost 1.7% YTD. Revenue projections for fiscals 2018 and 2019 are $69.5 billion and $71.7 billion respectively. EPS forecasts for the years are $4.2 and $4.3 respectively. The forward PE ratio is 10x at present compared to 14.4x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from eight, eleven and fifteen analysts respectively. Five and one analysts have assigned it a "underperform" and "sell" forecast respectively.

Microchip Technology

In August 2018, Microchip (MCHP) raised its quarterly dividend to $0.364, marking a dividend increase for the 57th time since its inception. Microchip Technology paid $85.5 million towards dividends in the quarter ended June 30, 2018.

Sources: Company, Morningstar

The company is a developer, manufacturer, and seller of specialized semiconductor products for varied embedded control applications.

The primary reporting segments of the company include:

  • Semiconductor products, recording net sales of $3.9 billion in fiscal 2018.
  • Technology licensing, with net sales of $104.8 million in fiscal 2018.

China accounted for 30%, 32% and 30% of net sales in fiscal 2018, 2017 and 2016 respectively. The fiscal years ended on March 31. Net sales increased at a 5-year average of 20.3% to $4 billion in fiscal 2018. EPS has grown at a 5-year average of 0.1% to $1. The net sales improved by 25% to $1.2 billion in the first quarter of fiscal 2019. EPS dropped by 80% to $0.1. The decline was due to the higher cost of sales, operating and interest expenses partially offset by an income tax benefit.

Gross margin rose from 58.5% in fiscal 2014 to 60.8% in fiscal 2018. Operating margin increased from 23.9% in fiscal 2014 to 24% in fiscal 2018. Net margin declined from 20.5% in fiscal 2014 to 6.4% in fiscal 2018.

Consensus estimate

Microchip acquired semiconductor company Microsemi in May for terms undisclosed. Senior secured notes worth $2 billion was issued to finance the acquisition partly. The stock has lost 29.1% YTD. Net sales projections for fiscal 2019 and 2020 are $5.7 billion and $6.2 billion respectively. Forecasted EPS for those years are $6.7 and $7.6 respectively. The forward-PE ratio is 9.5x at present compared to 15.5x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from five, eight and four analysts respectively.

KLA-Tenor

In February 2018, KLA-Tenor (KLAC) increased the quarterly dividend by 27% to $3 annualized. The company returned $0.6 billion in fiscal 2018 via share buybacks and dividends.

Sources: Company, Morningstar

The company is a leading supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. The company has only one reportable segment.

China contributed 16%, 12% and 14% of the revenue for the fiscal years 2018, 2017 and 2016 respectively. The fiscal years ended on June 30. Revenue has grown at a 5-year average of 7.3% to $4 billion in fiscal 2018. EPS has increased at a 5-year average of 0.1% to $5.1. Revenue rose by 13% to $1.1 billion in the quarter ended September 30, 2018 (or the first quarter of fiscal 2019). EPS increased by 43% to $2.5.

Gross margin rose from 57.9% in fiscal 2014 to 64.1% in fiscal 2018. Operating margin increased from 26.4% in fiscal 2014 to 38.1% in fiscal 2018. The net margin remained at 19.9% between fiscals 2014 and 2018.

Consensus estimate

KLA-Tenor CFO and analysts had talked about the weakening demand of the $121 billion global memory chip industry in September. As a result, Samsung announced a reduction in memory chip output for fiscal 2019. Average selling prices for NAND flash memory chips in mobile devices, and memory cards have almost halved from the peak attained in 2017. However, price rates of DRAM memory chips in servers, gaming PCs and cryptocurrency mining devices have gained more than 20%. The stock has lost 19% YTD. Revenue has been forecasted to grow to $4.4 billion and $4.6 billion in fiscals 2019 and 2020 respectively. Projected EPS for the years is $9 and $9.4 respectively. The forward PE ratio is 9.7x at present compared to 15x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from six, five and two analysts respectively.

Lam Research Corporation

In March 2018, Lam Research (LRCX) increased its quarterly dividend by 120% to $4 on an annualized basis. The company undertook share buybacks and dividends worth $1.9 billion in the quarter ended September 30, 2018.

Sources: Company, Morningstar

The company is a worldwide supplier of innovative wafer fabrication equipment and services to the semiconductor industry. It operates in one reportable business segment.

China constituted 16%, 13% and 18% of revenue for fiscals 2018, 2017 and 2016 respectively. The fiscal years ended on June 24, 25 and 26 respectively. The Revenue has grown at a 5-year average of 25.2% to $11.1 billion in fiscal 2018. EPS grew at a 5-year average of 0.8% to $13.2. The revenue declined by 6% to $2.3 billion in the first quarter of fiscal 2019 or the quarter ended September 23, 2018. EPS increased by 1% to $3.2.

Gross margin rose from 43.6% in fiscal 2014 to 46.6% in fiscal 2018. Operating margin increased from 14.7% in fiscal 2014 to 29% in fiscal 2018. Net margin improved from 13.7% in fiscal 2014 to 21.5% in fiscal 2018.

Consensus estimate

The stock has lost 26.2% YTD. Revenue has been forecasted to be worth $10.3 billion and $11.4 billion for fiscal 2019 and 2020 respectively. EPS has been projected at $15.1 and $17.2 respectively. The forward PE ratio is 9.6x at present compared to 12.9x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from five, eight and six analysts respectively.

Applied Materials

In February 2018, Applied Materials (AMAT) declared a 100-percent increase in the quarterly dividend to $0.8 annualized. It also announced a $6 billion share buyback authorization. The company returned $4.9 billion to shareholders via share buybacks and dividends in the nine months of fiscal 2018.

Sources: Company, Morningstar

The company is a leading supplier of manufacturing equipment, services, and software to the semiconductor, display and related industries. The primary reporting segments include:

  • The Semiconductor Systems segment which is comprised principally of capital equipment used to fabricate semiconductor chips with net sales of $9.5 billion in fiscal 2017.
  • The Applied Global Services segment which provides with integrated solutions for the optimization of equipment and fab performance and productivity for semiconductor, display and solar products with net sales of $3 billion in fiscal 2017.
  • The Display and Adjacent Markets segment encompassing products for manufacturing liquid crystal and OLED displays, and other display technologies for TVs, PCs, tablets, smartphones, equipment upgrades and flexible coating systems with net sales of $1.9 billion in fiscal 2017.

China constituted 19%, 21% and 17% of revenue for fiscal 2017, 2016 and 2015 respectively. The fiscal years ended on October 29, 30 and 25 respectively. Net sales have grown at a 5-year average of 10.8% to $14.5 billion. EPS grew at a 5-year average of 1% to $3.2. Net sales increased by 25% to $13.2 billion in the nine months of fiscal 2018. EPS rose by 4% to $2.4.

Gross margin improved from 39.8% in fiscal 2013 to 44.9% in fiscal 2017. Operating margin increased from 10.2% in fiscal 2013 to 26.6% in fiscal 2017. Net margin improved from 3.4% in fiscal 2013 to 23.6% in fiscal 2017.

Consensus estimate

Applied Materials stock prices were affected by lower revenue and profit projections compared to the consensus estimates for the third quarter of fiscal 2018. The stock has lost 39.1% YTD. Net sales forecasts for fiscal 2018 and 2019 are $17.2 billion and $17.1 respectively. EPS projections are $4.5 and $4.3 respectively. The forward PE ratio is 7.6x at present compared to 12.9x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from seven, ten and six analysts respectively.

Analog Devices

In February 2018, Analog Devices (ADI) announced a hike of 7% in its quarterly dividend to $1.92 annualized marking the company's 15th dividend growth. Analog Devices returned $0.6 billion towards share buybacks and dividends in the nine months of fiscal 2018. It increased the share buyback authorization by $2 billion in August.

Sources: Company, Morningstar

Analog Devices is a designer, manufacturer, and marketer of an extensive range of integrated circuits (ICS). It has a single operating segment.

China constituted 16%, 17% and 15% of revenue for fiscal 2017, 2016 and 2015 respectively. The fiscal years ended on October 28, 29 and 31 respectively. Revenue has grown at a 5-year average of 13.6% to $5.1 billion. The EPS remained flat during the 5-year period at $2.1. Revenue increased by 29% to $4.6 billion in the nine months of fiscal 2018. EPS rose by 156% to $2.8.

Gross margin declined from 64.3% in fiscal 2013 to 59.9% in fiscal 2017. Operating margin decreased from 29.7% in fiscal 2013 to 21.6% in fiscal 2017. Net margin reduced from 25.6% in fiscal 2013 to 14.2% in fiscal 2017. The higher operating and interest expenses led to the decline in the profit margins.

Consensus estimate

The company partnered with Chinese search engine giant Baidu in July towards the development of the latter’s autonomous driving technologies. Analog Devices has lost 9.7% YTD. Revenue has been estimated to be worth $6.2 billion and $6.4 billion for fiscal 2018 and 2019 respectively. EPS projections are $5.9 for both the years. The forward-PE ratio is 13.5x at present compared to 17.5x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from eight, seven and eight analysts respectively.

Skyworks Solutions

In July 2018, Skyworks Solutions (SWKS) increased its quarterly dividend by 19% to $1.52 on an annualized basis. The company returned $0.7 billion by share buybacks and dividends in the nine months ended June 29, 2018.

Sources: Company, Morningstar

The company has a single reportable operating segment which designs, develops, manufactures and markets similar proprietary semiconductor products.

China generated 83%, 71% and 69% of the revenue for fiscal 2017, 2016 and 2015 respectively. The fiscal years ended September 29, 30 and October 2 respectively. Net revenue has grown at a 5-year average of 18.4% to $3.7 billion in fiscal 2017. EPS grew at a 5-year average of 0.4% to $5.4. Net revenue increased by 7% to $2.9 billion in the nine months of fiscal 2018. EPS declined by 12% to $3.4. The decline was due to tax reforms initiated in 2017.

Gross margin rose from 42.8% in fiscal 2013 to 50.4% in fiscal 2017. Operating margin increased from 19.6% in fiscal 2013 to 34.4% in fiscal 2017. Net margin improved from 15.5% in fiscal 2013 to 27.7% in fiscal 2017.

Consensus estimate

Skyworks Solutions is a supplier of radio frequency chips for Apple iPhones. The company is one of the critical suppliers to issue warning against weakening demand for smartphones and restrictions imposed upon ZTE. The stock has lost 13.8% YTD. Net revenue has and been forecasted at $3.9 billion and $4.1 billion for fiscal 2018 and 2019 respectively. EPS projections for the years are $7.2 and $7.9 respectively. The forward PE ratio is 10.3x at present compared to 13x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from nine, twelve and seven analysts respectively. One has assigned it a "underperform" recommendation.

Xilinx

In April 2018, Xilinx (XLNX) announced a 3% hike in quarterly dividend to $1.44 annualized. The company returned $0.3 billion by share buybacks and dividends in the six months ended September 29, 2018.

Xilinx is a designer, developer, and marketer of programmable logic semiconductor devices and the associated software design tools. It has only one operating segment. Xilinx sells its products to OEMs and to electronic components distributors who resell these products to OEMs or subcontract manufacturers.

Sources: Company, Morningstar

China accounted for 26%, 25% and 24% of the revenue for fiscal 2018, 2017 and 2016 respectively. The fiscal years ended on March 31, April 1 and April 2 respectively. Net revenue has grown at a 5-year average of 3.2% to $2.5 billion in fiscal 2018. EPS has grown at a 5-year average of 0.02% to $2. Net revenue increased by 16% to $1.4 billion in the first half of fiscal 2019. EPS rose by 26% to $1.6.

Gross margin increased from 68.8% in fiscal 2014 to 70.2% in fiscal 2018. Operating margin declined from 31.8% in fiscal 2014 to 29.3% in fiscal 2018. Net margin reduced from 26.5% in fiscal 2014 to 20.2% in fiscal 2018. The decline in profit margins for fiscal 2018 was due to higher R&D, executive transition costs, and non-recurring charge associated with the 2017 tax reform.

Consensus estimate

The stock has gained 16.2% YTD. Net revenue has been forecasted to be worth $2.9 billion and $3.1 billion in fiscal 2019 and 2020 respectively. EPS projections for the years are $3 and $3.3 respectively. The forward PE ratio is 24.9x at present compared to 24x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from four, eight and ten analysts respectively. One has assigned it a "underperform" recommendation.

NVIDIA Corporation

In November 2017, NVIDIA (NVDA) raised its quarterly dividend by 7% to $0.6 annualized. NVIDIA returned $0.8 billion towards share buybacks and dividends in the six months ended July 29, 2018. It intends to repay $1.3 billion towards share buybacks and dividends in fiscal 2019.

Sources: Company, Morningstar

NVIDIA focusses in products and platforms for the large, growing markets of gaming, professional visualization, data center, and automotive. The two reportable segments are:

  • GPU (graphics processing unit) which recorded revenue of $9.7 billion in fiscal 2018 from growth in gaming, datacenter and professional visualization.
  • Tegra Processor recorded revenue of $1.5 billion in fiscal 2018 from gaming platforms and automotive.

China generated 20%, 19% and 16% of the revenue for fiscals 2018, 2017 and 2016 respectively. The fiscal years ended on January 28, 29 and 31 respectively. Revenue rose at a 5-year average of 17.8% to $9.7 billion in fiscal 2018. EPS increased at a 5-year average of 0.4% to $4.8. Revenue grew by 52% to $6.3 billion in the first half of fiscal 2019. EPS improved by 119% to $3.7.

Gross margin improved from 54.9% in fiscal 2014 to 59.9% in fiscal 2018. Operating margin increased from 12% in fiscal 2014 to 33.1% in fiscal 2018. The net margin grew from 10.7% in fiscal 2014 to 31.4% in fiscal 2018.

Consensus estimate

Nvidia has partnered with companies like Hewlett Packard Enterprise, Oracle Corp and International Business Machines for AI forecasting tools. It also strengthened its collaboration with Volvo towards autonomous driving capabilities. The stock lost 4.1% YTD. Revenue forecasts for fiscal 2019 and 2020 are $13 billion and $14.8 billion respectively. EPS has been projected at $7.3 and $8 respectively. The forward PE ratio is 22.7x at present compared to 38.3x in fiscal 2017.

The stock has a "buy," "outperform" and "hold" recommendation from ten, fifteen and ten analysts respectively.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.