Qualcomm Hikes Dividend

The board of directors of Qualcomm (QCOM – Analyst Report) recently increased the company’s quarterly cash dividend by approximately 13{e1f18614b95d3cd6e4b3128e1cd15d99b042a60a5a19c19b7a8e07e7495efa10} to 21.5 cents per share on its common stock. The hike in the dividend rate will be effective after the payment of the earlier dividend of 19 cents per share, as announced by the company, on January 14, 2011.
The rise in dividend was mainly driven by significant surge in demand for the high-end 3G smartphones and tablets resulting in steady revenue and earnings growth.
This is the company’s sixth dividend increase during the last five years. The company has been paying dividends uninterruptedly for the last nine years. The current dividend yield is 1.33{e1f18614b95d3cd6e4b3128e1cd15d99b042a60a5a19c19b7a8e07e7495efa10}.
Qualcomm possesses a strong balance sheet with $19,107 million of cash and marketable securities. The excess cash, available with the company, will be utilized to acquire new companies or to pay dividends to its shareholders.
Broadcom Corp. (BRCM – Analyst Report) and Texas Instruments Inc. (TXN – Analyst Report) are the nearest rivals of Qualcomm. Recently, both these competitors paid quarterly dividends of 9 cents and 13 cents with dividend yields of 0.85{e1f18614b95d3cd6e4b3128e1cd15d99b042a60a5a19c19b7a8e07e7495efa10} and 1.42{e1f18614b95d3cd6e4b3128e1cd15d99b042a60a5a19c19b7a8e07e7495efa10}, respectively, much below the dividend paid by Qualcomm.
Qualcomm reported record-high earnings in the first quarter of fiscal 2011. Net income was up 39{e1f18614b95d3cd6e4b3128e1cd15d99b042a60a5a19c19b7a8e07e7495efa10} year over year. The company’s state-of-the-art Snapdragon platform and product diversification induce confidence in management to provide a solid outlook for fiscal 2011.
We, thus, maiantain our long-term Outperform recommendation for Qualcomm. Currently, Qualcomm has a Zacks #2 Rank, implying a short-term Buy rating on the stock.