Qualcomm Boosts Dividend by 40%, Sets $5 Billion BuybackKarl Baker
Qualcomm Inc. boosted its dividend by 40 percent and set up a $5 billion share-buyback plan, rewarding investors after rising demand for smartphones that run on its technology spurred sales growth.
The quarterly cash dividend will increase to 35 cents from 25 cents, Qualcomm, the largest seller of semiconductors for mobile phones, said in a statement today. The new share-repurchase plan replaces an older $4 billion plan that had $2.5 billion remaining.
Since 2003, Qualcomm has returned $19.9 billion to investors through a combination of stock repurchases and cash dividends. The majority of Qualcomm’s revenue comes from baseband chips, which connect phones to cellular networks, sold to wireless-device makers such as Apple Inc., HTC Corp. and Samsung Electronics Co. Most of the company’s profit comes from the licensing of so-called code division multiple access technology, a radio-communications standard used in other chips, handsets and phone systems.
“They have ample cash that puts them in line with other big tech bellwethers like Apple,” Alex Gauna, an analyst at JMP Securities LLC. He recommends buying the shares and has a $75 target price. The buyback and the magnitude of the dividend increase were a surprise, he said.
“It was not something that was widely discussed,” Gauna said. “I don’t think this has been priced into the shares.”
Qualcomm rose 2 percent to $67.97 at the close in New York, leaving the shares 9.9 percent higher this year. That compares with a 8 percent advance for the Standard & Poor’s 500 Index.
Qualcomm had cash and investments of $28.4 billion as of December, according to the company.
“Looking at the macroeconomic environment we’re operating in, it’s really amazing to see the kind of growth we were able to achieve,” Chief Executive Officer Paul Jacobs said at a shareholder meeting today. “We had a pretty good year.”
Separately, Jacobs said that the company isn’t satisfied with its Qualcomm Enterprise Services, or QES, division’s performance and may consider “strategic alternatives.”
QES, which provides truck location-tracking services, had $371 million of revenue in Qualcomm’s most recent fiscal year, down from $395 million a year earlier, and accounting for 1.9 percent of the company’s total sales.
“It’s obviously not as profitable as it had been in the past, and so we’re in the process of looking at how to restructure it,” Jacobs said. “The real question is can we drive it to be a strong business in the context of overall Qualcomm.”