Dividend yields are calculated by dividing annual dividend per share by stock price per share. Dividend yield tells us the percentage of dividend returns an investor gets for the price she paid for the stock. Dividends are generally paid out by large companies with ample cash reserves and cash flows.
Dividends come at the cost of a stock’s growth potential because a company can use that cash to reinvest in its businesses in order to boost growth. Loss-making companies do not pay dividends, and so risk-averse investors typically prefer dividend stocks over growth stocks.
The top semiconductor stocks by dividend yield
As of December 22, 2017, Qualcomm (QCOM) had the largest annualized dividend yield of 3.52%, followed by Cypress Semiconductor (CY) at 2.87%, Maxim Integrated (MXIM) at 2.71%, Broadcom (AVGO) at 2.67%, and Texas Instruments (TXN) at 2.38%.
In dollar terms, AVGO had the highest annualized dividend of $7.00. As AVGO’s high stock price is over $258.0, its dividend yield is lower than that of Qualcomm, which has an annual dividend of $2.36. After AVGO is TXN, which has an annual dividend of $2.48.
Qualcomm has strong and assured cash flows, thanks to its licensing business. It has been increasing its dividend every four quarters for the past ten years. Licensing disputes with Apple (AAPL) have hampered its cash flows significantly, but it has sufficient cash to pay out dividends.
Broadcom and Texas Instruments
Broadcom was a new entry in the list of top dividend stocks as it increased its quarterly dividend by 73.5% from $1.02 to $1.75 in December 2017. The high dividend does not mean Broadcom has no good investment opportunities, however. The company is looking to acquire Qualcomm for $100 billion.
Texas Instruments became a new entry on our list of top dividend stocks when it increased its quarterly dividend by 24%, up from $0.50 to $0.62 in October 2017.
Cypress and Maxim
There has been no change in Cypress’s and Maxim’s dividends, and they’re maintaining their second and third positions, respectively, on our list of dividend stocks. Cypress has not increased its dividend since 2012, while Maxim has been increasing its dividend every four quarters since 2002—except in 2010, when it left its dividend per share unchanged.
Remember, a company needs strong profits and strong cash flows to pay a dividend. Next, we’ll look at the most profitable semiconductor companies of 2017.