Last Purchase of 2014 - QCOM

27 Dec 2014 02:33

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I thought my last purchase of THOR Industries (THO) would be my last buy of the year but I snuck in Qualcomm (QCOM) at the last minute which will add $33.60 annually to my dividend portfolio.


Qualcomm is most fammous for deploying technology in the mobile telcom industry with its most recognizable products being ARM snapdragon processors and 3G/4G/LTE modems. While mobile is their current cash cow they are far from sitting on their laurels and heavily investing on developing or acquiring new technologies that support the Internet of Things and quickly building a portfolio of new products.

Financially QCOMM is superbly managed. The have strong earnings & free cash flow growth rates, high profit margins (30%), no long term debt, over $17 billion in cash, a current ratio of 3.73, and a dividend payout ratio of 38%.

On the dividend front, QCOM has increased its dividend for 12 straight years with an average increase of 18.7% annually over the last five years. With a low payout ratio, continuing demand in mobile technology and heavy investment for tomorrows technology Qualcomm is making a stong case for continuing as a dividend growth machine for many years to come.

While some dividend growth investors might skip QCOM due to its low div yield (currently 2.22%) I believe long term dividend growth prospects out weigh the low yield and in the long term will produce a commendable yield on cost. With an aggressive dividend growth rate I calculate a fair value range from $79 to $90 share price, with current share price as of 12/26/2014 at $76 per share this was under my low end price target and a value buy.


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