Qualcomm Inc. boosted its dividend by 40 %and set up a $5 billion share buyback plan, rewarding investors after rising demand for smartphones that run on its technology spurred sales growth.
The quarterly cash dividend will increase to 35 cents from 25 cents, Qualcomm, the largest seller of semiconductors for mobile phones, said in a statement today. The new share repurchase plan replaces an older $4 billion plan that had $2.5 billion remaining.
Since 2003, Qualcomm has returned $19.9 billion to investors through a combination of stock repurchases and cash dividends. The majority of Qualcomm’s revenue comes from baseband chips, which connect phones to cellular networks, sold to wireless-device makers such as Apple Inc., HTC Corp. and Samsung Electronics Co. Most of the company’s profit comes from the licensing of so-called code division multiple access technology, a radio-communications standard used in other chips, handsets and phone systems.
“They have ample cash that puts them in line with other big tech bellwethers like Apple,” Alex Gauna, an analyst at JMP Securities LLC. He recommends buying shares and has a $75 target price. The buyback and the magnitude of the dividend increase were a surprise, he said.
“It was not something that was widely discussed,” Gauna said. “I don’t think this has been priced into the shares.”
The stock rose 2.3% to $68.16 at 9:49 a.m. in New York. Through yesterday, the shares had gained 7.7% this year, compared with a 6.9% advance for the Standard & Poor’s 500 Index.
Qualcomm had cash and short-term investments of $13.3 billion as of Dec. 30, according to data compiled by Bloomberg.
“Our business model continues to generate strong operating cash flows that enable us to invest in and execute on our strategic priorities, while also returning capital to stockholders,” Chairman and Chief executive Officer Paul E. Jacobs said in the statement.