What Texas Instruments actually does
Texas Instruments (TI) designs and manufactures semiconductors and is headquartered in Dallas, Texas. Its focus is analog chips and embedded processors, which together account for more than 80% of its revenue. Analog chips manage power, signals and sensors, and appear in cars, factories, appliances and electronics.
The company grew out of Geophysical Service Incorporated, founded in 1930, and took the Texas Instruments name in 1951. It is also known for its calculators.
How the business makes money
TI sells a huge catalogue of chips to thousands of customers. These products are not cutting-edge in the way AI processors are; they are widely used, long-lived and profitable. TI makes many of them in its own factories, which gives it control over cost and supply.
The business is cyclical: demand rises and falls with industrial and automotive spending. It is also capital-intensive, because building new factories takes years and a lot of money.
The dividend story
TI pays a quarterly dividend and has raised it every year for about two decades. The payout is large compared with many technology companies, because TI returns most of its free cash flow to shareholders.
The challenge is that heavy investment in new factories reduces free cash flow for a period, so it is worth following how well the dividend is covered. See our guide on dividend growth.
What to keep an eye on
- Cyclical demand. Industrial and automotive slowdowns hit sales.
- Capital spending. New factories reduce cash flow in the short term.
- Competition and trade rules. Chip makers face rivals and export restrictions.
- Dividend coverage. Check free cash flow, not only earnings.
Quick take
Texas Instruments is a rare technology company that is a genuine dividend payer. It offers steady growth in income, with returns that depend on the semiconductor cycle.