Texas Instruments has grown its dividend by more than 15% per year for the past decade, and is currently trading at a starting yield over 2.5%.

Should you invest in this dividend grower right now?

Let’s find out!

1. Do I understand the business model?

Texas Instruments is the world's largest analog chipmaker.

Their chips are used in lots of things, like cars, industrial machines, and personal electronics.

Business Structure

Texas Instruments’ business is dividend into 2 segments:

Analog chips handle real-world signals, like sound or light. They help devices measure things like temperature or pressure by turning the real-world signal into a digital one that can be processed by a computer.

Embedded chips are small processors that control specific tasks within devices. Here’s some of what they can do:

1. Control Functions: They manage operations like turning lights on and off, or adjusting temperature

2. Automation: Embedded chips help automate processes in devices, making them more efficient. For example, in washing machines, they control wash cycles

3. Communication: They enable devices to communicate with each other, such as smart home devices that work together

4. Real-Time Processing: These chips can quickly process data from sensors, allowing devices to respond instantly, like in cars for braking systems

5. Energy Efficiency: Many embedded chips are designed to use less power, helping devices run longer on batteries

The analog chip segment generates the majority of the revenue.

It also generates most of the operating income:

Competitive Advantages:

• Scale: Texas Instruments is the world’s largest analog chipmaker, giving them cost advantages

• Intangible assets: The company has years of built up knowledge and expertise around chip design and manufacturing

• Switching costs: Once an analog chip or control chip is designed into a product, the manufacturer doesn’t want to change it - remember the car shortage during the COVID pandemic - automakers halted production before they switched chips!

2. Is management capable?

Haviv Ilan, President, Chief Executive Officer, and Director:

Ilan became CEO in April 2023, succeeding Rich Templeton.

He joined the company in 1999 when they acquired Butterfly, a wireless start-up in Israel. He’s been the Executive Vice President and Chief Operating Officer (2020–2023), and Senior Vice President of Analog Signal Chain.

Ilan only holds around $9 million of $TXN stock.

Rich Templeton, Chairman of the Board:

Templeton (former CEO from May 2004 to March 2023) has been chairman since April 2008.