Legacy chipmakers raise dividends on AI cash flow
Texas Instruments and Qualcomm are leveraging robust free cash flow to increase shareholder payouts, offering investors a grounded alternative to highly valued AI growth stocks.
Texas Instruments and Qualcomm have both increased their quarterly dividends, underscoring a divergence in the semiconductor sector where mature businesses are funding returns through actual cash generation rather than speculative momentum.
The trend is anchored by Broadcom, which recently generated $10.262 billion in quarterly free cash flow—representing 46% of revenue—as its AI semiconductor revenue surged 143% year over year. The company's guidance targets $16 billion in revenue for the third quarter.
Texas Instruments trades at $301.19 following a 75.63% year-to-date rally, yielding 1.86% on a forward annualized payout of $5.68. The company recently lifted its quarterly dividend to $1.42 from $1.36, extending a 27-year streak without a cut.
The chipmaker funded $6.0 billion in shareholder returns over the trailing 12 months, supported by $7.8 billion in operating cash flow and $4.4 billion in free cash flow. Its balance sheet holds $3.549 billion in cash against $16.778 billion of equity. For its first fiscal quarter, Texas Instruments posted revenue of $4.83 billion, up 18.6% year over year, with earnings per share of $1.68 beating consensus estimates by 23.15%.
CEO Haviv Ilan identified industrial and data center operations as the primary growth engines, with second-quarter guidance projecting revenue between $5.00 billion and $5.40 billion. However, the stock's forward price-to-earnings ratio of 39 leaves little margin for error if the cycle turns, particularly given trailing capital expenditures of roughly $4.1 billion.
Qualcomm offers a different risk profile, trading at $177.98 with a 1.93% yield after raising its quarterly payout to $0.92. Its balance sheet metrics are notably strong: free cash flow yield sits at 6.83%, interest coverage is 18.6 times, net debt to EBITDA is 0.61, and debt to equity stands at 0.77.
The mobile chipmaker produced $4.416 billion in free cash flow in its first fiscal quarter and authorized a new $20 billion share repurchase program. It has increased its dividend annually for at least 16 years across a 23-year history of no cuts.
For market professionals, these established names present a distinct value proposition. They provide direct exposure to the artificial intelligence infrastructure buildout while insulating portfolios from the valuation risks associated with the market's most crowded trades.
