I’ve been looking to increase my weighting in the Information Technology sector for what seems like forever. Within my Portfolio, the tech name that I’ve wanted to add to, ever since I initiated a position in it this past January, is Texas Instruments (TXN). Part of the reason for that desire is that TXN was the smallest position in the Portfolio and I wanted it to have a larger weighting. The other part is that I believe TXN is positioned to grow, it maintains a nice dividend, and has impressive dividend growth.
TXN designs, manufactures, markets and sells semiconductors to various designers and manufacturers around the world. The company operates in two segments: Analog and Embedded Processing. Analog includes logic, power products, converters, amplifiers, sensors, etc. Embedded Processing includes microcontrollers and digital signal processors (DSPs).
As you probably know if you’ve been following along with my Portfolio Thoughts posts, I was looking to add to my position in TXN with another purchase below $100.
Unfortunately, that opportunity hasn’t come around often, as the last time TXN dipped below the $100 level was back in April.
With the recent pullback by stocks in the Info Tech sector, and especially the semiconductor stocks, TXN has come down to the $102 range for the 2nd time in the past month. While TXN did not quite reach my target price range, I decided it was close enough to add some shares. It’s a smaller addition than I planned on, but that’s due to paying a bit more for these shares than I had hoped. It also leaves the door open to add more shares should TXN decline further in price.
Let’s take a look at the details for this additional purchase of TXN…
TXN
On Friday, 10/5/18, I purchased 10 shares at $102.75/sh, for a total of $1,029.50 after commission.
This is approximately a 40% increase in my position, bringing my total to 35.28 shares.
In January, my purchase price was over a few dimes over $110 per share, thus today’s purchase lowered my cost basis, which now stands at $108.29/sh.
TXN shares were yielding ~3.00% at my recent purchase price, about 0.33% above my Portfolio average. TXN’s yield hasn’t climbed this high too often in the past 5 years, and when it has, it hasn’t stayed there for very long.
This purchase results in an additional $30.80 in annual forward dividend income, bringing my forward dividend income total for TXN to $108.66, and my Portfolio’s total to $8,858.68.
TXN moves from my smallest Portfolio weighting of 0.79% (#41), to 1.1% (#39), moving past Altria (MO) and Comcast (CMCSA). An average weighting in my Portfolio is ~2.44%. I’d like to see TXN eventually have a weighting above this average, so I’ll remain on the lookout for more TXN purchase opportunities.
Here’s a look at the dividend growth history for TXN, dating back to the year 2000. I’ve projected the final dividend total for 2018 since we are close to finishing the year.
TXN has raised their dividend for 15 years in a row, including 2018. As you can see from the table above, they started their dividend increases in 2004 and have never looked back. The dividend growth is astounding.
About 2-3 weeks ago, TXN increased their dividend by over 24%, which will favorably impact the already incredible dividend growth rates TXN has posted over all the reporting periods in my table.
In addition, the payout ratio is about 55% based on this year’s earnings estimates, leaving room for future dividend increases.
For details regarding my initial purchase of TXN, and my thoughts at that time, see my Recent Buy – TXN post from January.
Any thoughts on my TXN purchase? Would you have held out for a lower entry point, thinking TXN has more declines to come? Are there other tech names, especially semiconductor companies, you would prefer at this time? I look forward to your comments!
Hi ED,
It’s nice to see you back in action! I would love to have this company in my portfolio as well so I’ll need to add it to my watchlist. The only thing is that my next buy is going to happen in November as the earliest, most probably, so we’ll see how it looks like then.
By the way, have you noticed that this purchase was almost covered by your September dividend income? 🙂
BI
Hi BI,
Yes, back in the action… I didn’t leave for too long… maybe 5-6 weeks.
I want to keep adding to TXN and didn’t want this chance to add a bit pass me by. That said, I suspect there could be an opportunity to add more at a lower price given the recent sentiment surrounding tech stocks.
Regarding this purchase almost being covered by my September dividends… I didn’t think of it like that, but you are right. Amazing stuff!
Interesting buy! I’ve also been looking at ASML due to home-bias 🙂
I have decent exposure to Tech (including Intel) but am still interested in the sector.
I saw in one of your comments that you were watching ASML. Given that it’s based in the Netherlands, you most certainly hear more about them than we do in the U.S., so that can provide helpful insight. The chip equipment makers can be a nice play on the semiconductor space, in that you don’t need to be right about the particular segment of the chip space that is doing well (i.e. memory, microprocessor, DSP, analog, etc.).
As always, thanks for you comments, Mr. Robot!
Nice move ED. I like the addition. If you liked it the first time and the price fell afterwards, why wouldn’t you continue to add and build your position at a lower multiple. I haven’t given this stock too much attention lately, but I should do some more research into it based on your moves and your write-ups. Congrats on the purchase once again!
Bert
Thanks, Bert.
Not much has changed over the 8+ months since my original TXN purchase, so I agree with your thought about adding to the position.
I’ll be on the lookout for your TXN thoughts should you decide to examine the company and its stock.
Very nice purchase ED, and this is one I’ve been watching as a potential addition despite my desire to continue adding to existing positions rather than opening new. However, their growth is awfully enticing and I anticipate if they move a little closer to the $100 mark that I will be adding a few shares. Undecided on whether I might trim a few shares from my Apple holding or just buy with new capital, as my technology sector is overweight right now.
TXN’s yield is quite a bit above their 5-year average right now and not too far away from the high yields they touched right around the beginning of 2015 and 2016.
Good to know TXN is a consideration for you as well, DivvyDad.
My tech sector is underweight, hence the addition. I could see why you’d hold off on adding if you are overweight tech in your portfolio.
Your idea of trimming some Apple to buy some TXN is an interesting way to diversify your tech holdings without becoming further overweight in the sector. That would be a consideration for me as well.
TXN’s yield has certainly risen to an attention-getting level. The combination of their strong dividend growth and a drop in price has boosted it noticeably.