Qualcomm (QCOM) Dividend Stock Analysis
The Qualcomm dividend has been paid continuously since 2003 and increased for 14 consecutive years. QCOM is included in the Dividend Contenders List.
Current Dividend: $2.28
Dividend Yield: 4.3%
Cash Dividend Payout Ratio: 84%
Market Capitalization: 78 B
Enterprise Value: 79 B
Industry: Communications Equipment
Qualcomm (QCOM) is a global technology company concentrated in digital communications products. The company develops Code Division Multiple Access (CDMA); technology which allows many users to share bandwidth.
QCOM operates in three divisions:
Qualcomm CDMA Technologies (QCT)
QCT accounts for approximately two-thirds of Qualcomm revenues. This division designs and manufactures integrated circuits and system software for use in mobile phones, networking, multimedia, global positioning systems, et.al.
Qualcomm Technology Licensing (QTL)
QTL accounts for approximately one-third of Qualcomm revenues but a majority of its profits. This division takes Qualcomm’s intellectual property and receives fees and royalties by granting licenses for other entities to use its technology.
Qualcomm Strategic Initiative (QSI)
QSI is a small but growing division which invests in early stage companies or new technologies in a wide variety of industries.
Dividend Analyzer Checklist
(updated September 2017)
Dividend Safety Score (13/33 points)
Dividend Per Share (ttm): $2.16
Dividend Payout Ratio (ttm): 82%
Dividend Per Share (10 Year Growth): 17%
Cash From Operations (CFO) Per Share (ttm): $2.92
CFO Dividend Coverage (CFO / DPS): 1.4 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $2.54
FCF Dividend Coverage (FCF / DPS): 1.2 (1/6 points)
Net Financial Debt: $1035 M
Total Assets: $64379 M
Net Financial Debt / Total Assets: 2% (10/12 points)
Net Financial Debt to EBITDA (ttm): 217%
Total Liabilities to Assets Ratio (Qtr.): 51%
Piotroski Score (1-9) (TTM): (2/9 points)
Profitability & Growth Score (20/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 12.1% (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 9.9% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 8.6% (6/6 points)
Operating Earnings Yield (ttm): 5.3% (2/7 points)
Net Income (ttm): $3896 M
Gross Profit (ttm): $12892 M
Total Assets: $64379 M
Gross Profitability Ratio = GP / Total Assets: 20% (4/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 8%
Return on Invested Capital (ROIC): 9%
Return on Invested Capital (ROIC) (5 Year Median): n/a
Return on Invested Capital (ROIC) (10 Year Median): n/a
Valuation Score (18/34 points)
Free Cash Flow Yield (ttm): 4.9% (5/9 points)
EV to EBIT (ttm): 15.7 (4/9 points)
EV to EBITDA (ttm): 12.3 (4/9 points)
PE10: 18.8 (5/7 points)
Price to Sales Ratio (ttm): 3.5
Price to Book Value (ttm): 2.5
Price to Earnings Ratio (P/E) (ttm): 20.5
TOTAL SCORE – (51/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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Qualcomm’s competitive advantage is its strategic assets, namely patents on its intellectual property. The company receives royalty income on most 3G and 4G mobile phones sold. This revenue should grow for many years as underdeveloped countries produce a middle class of customers who are eager to buy mobile phones.
High customer concentration (i.e Apple) could deal major blows to future growth if Qualcomm were to lose those accounts.
Qualcomm is battling regulatory challenges to their licensing agreements in various countries. Major changes in their approach to receiving fees and royalties could be a major disruptor.
The next frontier of mobile technology is being led by Qualcomm. The fact the company is the market leader and has strong relationships with every important smartphone manufacturer gives the company important advantages.
Regulatory uncertainty pertaining to licensing is the greatest threat. Since the majority of Qualcomm’s profits are derived from licensing, a major change in the manner fees and royalties are calculated could produce large declines in profits. One of the risks of being a global company is that you have to face these regulatory challenges in a multitude of jurisdictions.
(updated September 2017)
Qualcomm (QCOM) is ranked #138 overall (out of 342) and #15 (out of 18) in the Technology Sector by the Dividend Analyzer. QCOM is facing too much uncertainty to have any margin of safety; especially given its recent poor performance.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Can Be Considered
Looking For Exposure to Technology Sector/ AVOID
Deep Value Investors / AVOID
Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None
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