Last update on 2024-06-27

Qualcomm (QCOM) - Dividend Analysis (Final Score: 7/8)

Comprehensive dividend analysis of Qualcomm (QCOM) with a final score of 7/8, assessing the company's stability and performance over 20 years.

Short Analysis - Dividend Score: 7

We're running Qualcomm (QCOM) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Qualcomm (QCOM) scored 7 out of 8 based on the criteria for evaluating a company's dividend policy. The company's current dividend yield is significantly higher than the industry average, making it attractive for dividend-seeking investors. Qualcomm's dividends have also generally shown a consistent growth rate despite some volatility, and the payout ratio is sustainably low, indicating financial stability. Additionally, dividends have been mostly well-covered by earnings, and cash flow coverage has fluctuated but shows improvement. With a stable and growing dividend track record since 2003 and ongoing stock repurchases, Qualcomm demonstrates commitment to returning value to its shareholders.

Insights for Value Investors Seeking Stable Income

Qualcomm (QCOM) appears to be a solid option for investors interested in steady dividend income and potential growth. Despite some fluctuations in dividend growth and coverage ratios, the company's strong overall performance, financial stability, and shareholder-friendly policies make it a worthwhile consideration. Investing in QCOM could be beneficial for long-term income generation and capital appreciation.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Qualcomm's (QCOM) current dividend yield of 2.178% is significantly higher than the industry average of 0.65%. Historically, Qualcomm's dividend yield has fluctuated, with notable peaks in 2015 (3.72%) and 2021 (2.6651%). The closing stock prices have shown volatility over the last 20 years, from $26.96 in 2003 to $144.63 in 2023. The divergence between Qualcomm's dividend yield and the industry average indicates that Qualcomm is more attractive for income-seeking investors, especially given its consistent dividend per share growth, from $0.12 in 2003 to $3.15 in 2023. This trend is favorable as it highlights Qualcomm’s ability to generate higher returns for its shareholders compared to its peers.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion assesses whether the annual growth in dividends per share over a prolonged period has been robust, typically aiming for a benchmark higher than 5%. This is important because a consistently high dividend growth rate indicates a company's strength, profitability, and commitment to returning value to its shareholders.

The provided Dividend Ratio data for Qualcomm (QCOM) shows significant fluctuating growth rates year over year, ranging from very high values like 87.5% in 2004 to much lower ones like 2.05% in 2019. The data indicates inconsistency in the dividend growth rate over the past 20 years, with an average growth rate falling at 18.1694%, suggesting an overall positive but volatile trend. This volatility can be a concern as it implies unpredictability in Qualcomm's ability to consistently grow dividends. Still, surpassing the 5% benchmark clearly signifies a generally strong dividend growth performance, albeit not without its ups and downs.

Average annual Payout Ratio lower than 65% in the last 20 years?

An average payout ratio lower than 65% over a long period, such as 20 years, suggests that the company has been distributing a sustainable portion of its earnings as dividends while retaining enough profits to reinvest in its own growth and operational needs. It is a key indicator of a company's financial stability and its ability to continue paying and potentially increase dividends in the future.

Qualcomm's average payout ratio over the past 20 years stands at approximately 38.45%, which is well below the 65% threshold. This trend signals a conservative and sustainable approach towards dividend distribution. In only a few instances, such as in 2009 (70.41%) and 2018 (135.35%), did Qualcomm's payout ratio exceed 65%, and these instances may have been influenced by extraordinary circumstances such as the economic downturn in 2009 and significant one-time charges or financial events in 2018. Notably, the negative payout ratio in 2019 also suggests an unusual scenario, possibly due to net losses or adjustments in accounting. Over the long run, however, the company has demonstrated prudent management of its earnings allocation, which bodes well for future dividend stability and growth.

Dividends Well Covered by Earnings?

The criterion states that the dividends paid by Qualcomm must be satisfactorily covered by its earnings per share (EPS). A higher ratio indicates strong earnings generation capabilities to sustain or even increase dividends, essential for long-term dividend stability.

From the data given, over the years Qualcomm's dividends have mostly been well-covered by its earnings per share. Historically, the company has largely maintained a ratio that usually stays below 0.7, reflecting strong earnings relative to dividend payments. Notable exceptions include the years 2009 and 2023, where the EPS to dividend ratios touched 0.704 and 0.486 respectively, hinting at temporarily lower earnings compared to dividends. 2015 and 2018 reflected extreme outliers with ratios of over 1.35 and a negative cover probably caused by one-time unusual earnings or losses which negatively impacted the EPS.Overall, the trend is quite positive but Qualcomm needs to ensure their earnings growth aligns well with their dividend growth for the long term.

Dividends Well Covered by Cash Flow?

A company's dividends should ideally be well covered by its free cash flow to ensure sustainability and avoid relying on debt. Free cash flow indicates the cash a company generates after accounting for capital expenditures, and a high coverage ratio signifies a company's good financial health.

In 2003, Qualcomm had a dividend coverage ratio of approximately 0.087, indicating that their free cash flow was barely able to cover their dividend payouts. This trend improved modestly over time, with notable upticks in 2004 (0.144) and 2005 (0.248). Around 2008, the coverage ratio increased significantly to 0.454, providing better dividend stability. However, fluctuations continued as seen in 2009 (0.170) and 2010 (0.455). A substantial upward trend is evident in 2017 with a peak coverage ratio of 1.114, showing that the free cash flow more than covered the dividend payouts for that year. More recently, Qualcomm has managed to maintain a reasonably stable coverage with ratios around 0.45 to 0.47. This means that while there have been fluctuations, Qualcomm has ensured its dividends are generally sustainable. However, continuous high coverage ratios are necessary for absolute financial health, as occasional dips below 0.3 could still pose risks to dividend sustainability. Qualcomm should prioritize steady free cash flow growth to maintain robust dividend coverage.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividends over the past 20 years is a key factor for income investors. It ensures a reliable income stream and reflects a company's financial health and policy toward returning value to shareholders. The criterion underscores the importance of analyzing if the dividend payments have not dropped by more than 20% in any given year.

Examining Qualcomm's dividend history from 2003 to 2023, the dividend per share rose consistently each year. Starting at $0.12 in 2003 and reaching $3.15 in 2023 shows a commendable upward trajectory. This sustained growth suggests a robust financial practice, and central to attracting and retaining income-seeking investors. Nevertheless, a closer look reveals a peculiar instance where the dividend dropped by more than 20% in one of these years. This deviation signifies a temporary challenge but given the broader trend, Qualcomm has overall demonstrated strong dividend stability. Thus, while this anomaly warrants scrutiny, Qualcomm's dividends display an overall stable and growing trend, which is beneficial.

Dividends Paid for Over 25 Years?

A company that has continuously paid dividends for over 25 years is often considered financially stable and committed to returning value to shareholders. This long-term consistency is usually viewed positively by investors seeking reliable income.

Based on the provided data, Qualcomm (QCOM) has a strong history of dividend payments dating back to 1998. Despite a gap in dividends in the years 1999 to 2002, the company has shown a consistent and growing dividend payout starting from 2003 up to 2023. The initial dividend in 1998 of $0.0703 increased substantially to $3.15 in 2023. This trend showcases Qualcomm's robust financial health and commitment to shareholder returns. Overall, the upward trajectory in dividend payments indicates a positive trend, contributing to investor confidence and attractiveness of the stock for dividend investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchase refers to a company consistently buying back its shares over a number of years, which typically provides a positive signal to investors about the firm's confidence in its future cash flow and earnings. It can also contribute to improving the earnings per share (EPS) ratio by reducing the number of outstanding shares.

Over the past 20 years, Qualcomm (QCOM) has shown a mixed but generally positive trend in stock repurchases. The number of shares decreased from 1.635 billion in 2003 to 1.117 billion in 2023. The most significant reductions in outstanding shares occurred after 2013. Despite some fluctuations, including increases during certain years (e.g., 2005, 2010, and 2012), the general trend has been a reduction in the number of shares. The reliable repurchased years, including major years like 2014, 2015, and continuing consistently from 2016-2023, indicate Qualcomm’s commitment to returning value to its shareholders. This trend is favorable, as consistent buybacks over the years bolster investor confidence and contribute positively to the stock's overall performance.