The board of directors of QUALCOMM Inc. (QCOM) recently raised the company’s quarterly cash dividend by 20% to 42 cents per share on its common stock. The hike will be effective from the day of declaration. Following this the company also increased its share repurchase agreement by $5.0 billion, bringing the recent authorization to $7.8 billion.
We believe the rise in dividend is due to huge cash reserve of the company. Qualcomm expects its long-term growth to continue at this rate due to increased demand for tablets and smartphones coupled with aggressive deployment of 4GLTE networks, most of which are using the chipset of Qualcomm’s Snapdragon platform.
This is the company's ninth dividend increase in the last five years. The company has been paying dividends uninterruptedly for the last 12 years. The current dividend yield is 2.2%.
Qualcomm possesses a strong balance sheet with $31,610 million of cash and marketable securities. The excess cash available with the company will be utilized to acquire companies or to pay dividends.
Broadcom Corp. (BRCM), Intel Corporation (INTC) and NVIDIA Corporation (NVDA) pose significant competitive threat to Qualcomm. Recently, the all three companies paid quarterly dividends of 12 cents, 22.5 cents and 8.5 cents, with dividend yields of 1.6%, 3.6% and 1.8%, respectively, clearly below Qualcomm’s dividend payout.
The company’s revenues in the recently concluded quarter increased 10% year over year to $6,622 million. Notably, Qualcomm shipped approximately 213 million CDMA-based MSM chipsets in the first quarter of fiscal 2014, up 17% year over year. The management also increased its financial outlook for fiscal 2014.
Currently, Qualcomm carries a Zacks Rank #3 (Hold).
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