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Qualcomm (QCOM) Dividend Stock Analysis
The Qualcomm (QCOM) dividend has been paid continuously since 2003 and increased for 20 consecutive years; qualifying the company as a Dividend Contender.
Current Dividend Annualized: $3.00
Qualcomm (QCOM) Intrinsic Value – Margin of Safety Analysis
(updated February 2023)
Normalized Diluted Earnings Per Share (TTM): $10.44
Free Cash Flow Per Share (TTM): $7.10
Cash Flow From Operations (CFO) Per Share (TTM): $8.93
Estimated Intrinsic Value: $146
Target Buy Price Based on Required Margin of Safety = $121
(Required Margin of Safety Based On Risk Stability Grade:
A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)
Target SELL Price Based on Estimated Intrinsic Value = $167
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)
Risk / Stability Grade: B
A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.
B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.
C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.
D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.
F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.
Financial Risk Grade: A
A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.
B grade indicates a very low probability for a dividend cut.
C grade indicates a low probability for a dividend cut and/or average safety risk.
D grade indicates there are issues that should be considered concerning future dividend payments.
F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.
Business Quality Grade: A
A grade indicates earnings quality is high or far above average.
B grade indicates earnings quality is good and/or above average.
C grade indicates earnings quality is acceptable or average.
D grade indicates earnings quality is poor and requires thoughtful due diligence.
F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.
Earnings Report: 12/31/22
AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – LONG
Treasure Trove Dividend – None
Global Dividend Value – LONG
Global Value – LONG
Global Value Aggressive – LONG
Global High Yield – None
Industry: Communications Equipment
Qualcomm develops and licenses wireless technology and also designs chips for smartphones. The company’s key patents revolve around CDMA and OFDMA technologies, which are standards in wireless communications that are the backbone of all 3G and 4G networks. The firm is a leader in 5G as well.
Qualcomm’s IP is licensed by virtually all wireless device makers. The firm is also the world’s largest wireless chip vendor, supplying many premier handset makers with leading-edge processors.
QCOM is also the world’s largest wireless chip vendor, supplying nearly every premier handset maker with leading-edge processors.
Qualcomm also sells RF-front end modules into smartphones and chips into automotive and Internet of Things markets.
Qualcomm’s competitive advantage is its strategic assets, namely patents on its intellectual property. The company receives royalty income on most 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. The company collects royalty income on the majority of 3G, 4G, and 5G handsets sold, it holds virtually all essential patents used in these networks.
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 company is losing market share at companies such as Samsung and Apple at theses customers develop products in-house.
The fact the company is the market leader and has strong relationships with every important communication manufacturers gives the company important advantages. It is leveraging its expertise into automotive and Internet of Things end markets.
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.
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While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.