The technology industry changes rapidly. Innovation is critically important, to keep up with evolving trends.
For an example of this, consider the cases of Texas Instruments (TXN) and Intel Corporation (INTC). On the surface, they seem like very similar companies.
Both Texas Instruments and Intel are large-cap tech stocks, operating in the semiconductor industry. They both manufacture a wide range of chips, that go into a variety of products.
However, their performance has greatly diverged over the past several years.
Those who invested in Texas Instruments stock exactly five years ago, have seen their investment return 148%, not including dividends. By contrast, Intel’s share price increased just 34% in the same period.
The two stocks have different dividend qualities as well. Texas Instruments is a Dividend Achiever, a group of 271 stocks with 10+ years of consecutive dividend increases.
You can see the full Dividend Achievers List here.
Intel is not a Dividend Achiever.
This article will discuss which of these two semiconductor giants is the better dividend growth stock to buy today.
Business Overview
Winner: Texas Instruments
Both Texas Instruments and Intel have had to undergo major turnarounds in the past several years.
While Intel’s turnaround has been shaky, Texas Instruments’ turnaround has been a huge success.
The reason is because Texas Instruments exited the mobile device market in 2012.
At that time, the company decided it would be more beneficial to focus its wireless operations on embedded markets, which offered greater growth potential.
Source: Capital Allocation Presentation, page 6
This proved to be a great decision: Texas Instruments generated $4.1 billion of free cash flow last year. Free cash flow has increased 8% per year on average, since 2004.
Texas Instruments grew earnings-per-share by 24% in 2016.
A critical factor in the decision to exit consumer phones, was the heightened level of competition in mobile chips.
