What we think about Texas Instruments
Texas Instruments in Three Words: Analog, Dividend, Semis
Discuss Texas Instruments in our Community Forum
Background
Since CEO Rich Templeton took the helm at Texas Instruments in 2004, the company has compounded its free cash flow per share at a 12% compound annual growth rate. Under his guidance, the giant semiconductor designer and the maker has moved into higher-margin products, invested heavily in manufacturing capabilities and capacity, and rewarded shareholders with strategic share repurchases and consistent dividend hikes.
To recognize the company possesses many sustainable economic advantages, one does not have to understand the intricacies of the semiconductors that Texas Instruments makes (I don’t). These moats give TI fat margins and a high return on capital — far better than most of its publicly traded peers in the S&P 500. The company’s management then uses its profits to reward shareholders through investments in organic growth, dividends, and share repurchases.
Texas Instruments sells approximately 80,000 products to more than 100,000 different customers. This incredible breadth of products accomplishes two critical things.
First, it insulates TI from the fall of any single industry or customer. More than 40% of the company’s revenue is generated from customers from outside its largest 100 customers.
Second, it increases TI’s cross-selling opportunities to the same customers. In Q3, TI grew revenue to $5.2 billion, a 13% increase year over year, while EPS rose to $2.47, a 19% increase over 2021’s third quarter. TI realized this growth even as it experienced weakness in personal electronics and industrial product categories. The semiconductor industry will always be cyclical to a certain extent, and TI’s growth will not grow in a straight line.
But even as there are bumps and false starts along the way, TI should continue to reward shareholders with outperformance over a long time horizon.
Conviction Rating Changes:
Join 7investing to get access to this section
Recent Company Updates:
Join 7investing to get access to this section