QUALCOMM (NASDAQ:QCOM) Is A Stable Dividend Stock

QUALCOMM Incorporated ( NASDAQ:QCOM ) engages in the development and production of foundational electronics for mobile, wireless, network and other consumer devices. The company is also notably involved in the expansion of 5G infrastructure solutions and investors are looking at this as a path to growth.

As Qualcomm matures, we are going to look at how they are sustaining their profitability and returning earnings to shareholders.

It is important to note that Qualcomm has a history of reliable dividend payments going back to 2003 and has been steadily increasing their dividend per share ever since.

Qualcomm has announced that it will be increasing its dividend on the 24th of June to US$0.68. This makes the dividend yield 2.0%, which is above the industry average.

The company also returned around 1.6% of its market capitalization to shareholders in the form of stock buybacks over the past year.

Check out our latest analysis for QUALCOMM.

QUALCOMM Covers Its Dividend By Earnings

Reliable dividend payments and stable yields build long-term trust for investors. Qualcomm is a reliable company, now with a kink for 5G market share participation.

The best kind of dividends are those that are well covered by the company’s profits.

Before making this announcement, QUALCOMM was easily earning enough to cover the dividend. This means that most of what the business earns is retained and used to help it grow.

If the dividend continues along recent trends, we estimate the payout ratio will be 31% by 2024, which is in the range that makes us comfortable with the sustainability of the dividend.

NasdaqGS:QCOM Historic Dividend May 29th 2021

QUALCOMM Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable, which gives us confidence in the future dividend potential.

Qualcomm has a long enough and reliable history of dividends.

The first annual payment during the last 10 years was US$0.76 in 2011, and the most recent fiscal year payment was US$2.72. This implies that the company grew its distributions at a yearly rate of about 14% over that duration.

We can see that payments have shown some very nice upward momentum without faltering, however they may now stabilize as analysts do not project major revenue growth rates for the company in the future.

This is not necessarily bad, as the share price and dividend payments could both stabilize and that might increase investor confidence when they consider adding this stock to their portfolio.

The Dividend Has Space To Grow

QUALCOMM has seen EPS rising for the last five years, at 17% per annum.

A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has room to increase the dividend over time.

Conclusion

Overall, we think this could be an attractive dividend stock.

It's rare to find a company that has grown its dividends rapidly over 10 years and not had any notable cuts, but QUALCOMM has done it, which we really like.

The company is easily earning enough to cover its dividend payments, and it is great to see that these earnings translate into cash flows for investors.

Investors generally tend to favor companies with a consistent, stable dividend policy as opposed to those operating an irregular one.

Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for QUALCOMM that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.