QUALCOMM, Inc. (NASDAQ:QCOM), at a recent annual shareholder meeting, rewarded investors with a 20% hike in dividends along with an increase in the stock repurchase authorization by $5.0 billion to $7.8 billion. Since October, Qualcomm has repurchased 27.6 million shares for $2 billion with an average repurchase price per share of $72.46. The technology firm also restated its strong 5-year capital return plan, which it earlier presented during its Analyst Day in November.
Qualcomm raising dividend more than EPS growth
Over the next five years, the company expects to return 2 times the capital it returned in the past five fiscal years. Management plans to return 75% of the free cash flow generated during the 5-year period through dividends and share buybacks.
Analysts T. Michael Walkley, Matthew D. Ramsay and Siddharth Sinha from Canaccord Genuity note that the company intends to raise the dividend at a higher pace than the EPS growth. In order to prevent dilution, the company plans to repurchase shares at certain levels, which would also lower the share count 5% to 10% over the five year period. In line with these objectives, QUALCOMM, Inc. (NASDAQ:QCOM) raised the dividend to $0.42 from $0.35 (for a current dividend yield of 2.3% and approximately a 33% payout ratio), which is more than the company’s current 13% 2014 Non-GAAP EPS growth guidance.
Upside expected for 2014, 2015
In the meeting, management also showcased its technology leadership position in technologies including multi-mode LTE baseband chipsets, mobile CPU, connectivity, RF, and mobile GPUs. Analysts T. Michael Walkley, Matthew D. Ramsay and Siddharth Sinha from Canaccord Genuity have reiterated a Buy rating on QUALCOMM, Inc. (NASDAQ:QCOM) with a price target of $86, and expect the growth to continue in smartphones, connected tablets, and connected devices for the M2M market. Analysts also expect increased market share for the integrated Snapdragon solutions, which would boost sales and earnings for 2014 and 2015.
Analysts believe that a greater high-end TD-LTE smartphone mix in China should improve the margins for QUALCOMM, Inc. (NASDAQ:QCOM), and may provide an upside to the consensus for 2014 and estimates for 2015. Based on the impressive initial gains in China TD-LTE segment along with strong content in the Galaxy S5, analysts believe their “F’14 and F’15 estimates could prove conservation.”