Key Points
- Semiconductor stocks are not typically known for paying high dividends due to the industry's competitive nature and focus on reinvestment.
- Broadcom pays an annual dividend of $18.40, with a yield of 2.17% and a track record of boosting shareholder payout over 13 years.
- NXP's stock broke out of a cup-shaped pattern in June, with a 15.93% increase in the past month.
- UMC increased its dividend in each of the past three years, paying a dividend yearly instead of quarterly like most American companies.
- 5 stocks we like better than Broadcom
Investors seeking dividends may overlook semiconductors, but some companies from the industry, including Broadcom Inc. NASDAQ: AVGO, NXP Semiconductors N.V. NASDAQ: NXPI and United Microelectronics Corp. NYSE: UMC are showing strong price growth and also pay dividends.
Semiconductor stocks, as a group, are not typically known for paying high dividends. The industry is highly competitive, and often characterized by its fast-paced nature. That means companies reinvest profits into research and development, capital expenditures, and innovation to launch new projects and keep up with ever-changing demand. For example, the recent demand for AI chips has sent companies scurrying to make investments in that area.
That focus on growth and reinvestment often results in lower dividend payouts compared to more mature and income-oriented sectors.
Some chip companies pay dividends, although it is less common compared to other sectors. Chip companies may choose to pay dividends if they are in a mature stage, generate consistent income, and want to attract investors. Dividends can signal to the market that a company is stable.
Here’s a look at three chip companies that recently increased their dividends.
Broadcom's New Deal With Apple
The California-based company recently inked a multi-billion dollar deal with Apple Inc. NASDAQ: AAPL for chips that help iPhones and other Apple devices communicate with mobile data networks. It’s an extension of a previous contract the companies had, which had a June expiration date.
Broadcom, which has a long history of profitability, pays an annual dividend of $18.40. MarketBeat’s Broadcom dividend data show a yield of 2.17% and a 13-year track record of boosting the shareholder payout.
Broadcom stock has returned 37.75% in the past three months and 55.79% year-to-date, as the chip industry has flourished. The stock broke out of a cup-with-handle base in mid-May.
Broadcom’s analyst ratings show a view of “moderate buy” on the stock. Since the company’s most recent earnings report, in early June, nine analysts boosted their price targets on the stock.
Combining strong price appreciation with dividends can offer a balanced investment approach, although investing for price growth generally means taking more risk.
NXP Semiconductors Cleared Cup Base
Netherlands-based NXP manufactures semiconductors for applications including automotive, secure identification solutions, wireless communications, analog power management, and connectivity. It’s one of the largest chip producers for the automotive market.
The stock broke out of a cup-shaped pattern on June 14; shares are up 15.93% in the past month.
MarketBeat’s NXP Semiconductors dividend data reveal a yield of 1.99% and a yearly payout of $4.06. The company boosted its payout for the past three years.
Analysts expect NXP to grow earnings by 12% this year, a signal that the dividend may also be increased. Earnings grew at a rate of 29% in the most recent quarter, despite year-over-year revenue coming in flat.
On July 6, NXP said it doesn’t foresee any material impact on revenue from China’s latest round of export curbs, which apply to certain automotive and communications chips it makes.
NXP Semiconductors analyst ratings show a consensus view of “moderate buy.”
United Microelectronics Makes Chips For Others
United Microelectronics Corporation functions as a semiconductor foundry, meaning that it provides advanced technology and manufacturing services for chips designed by its customers.
The Taiwan-based company specializes in the production of integrated circuits for various applications and industries including consumer electronics, communications, and automotive.
It has a market capitalization of $19.20 billion and a solid track record of profitability.
United Microelectronics’ dividend yield is extremely healthy, at 5.87%. Keep in mind: As share prices decline, the yield rises. UMC’s stock is still down significantly from its December 2021 high, and the stock has been trading lower in the past two weeks.
Nonetheless, the longer-term trend has been positive, with the stock showing a year-to-date gain of 26.89% and a one-month gain of 1.42%.
That downward trend could continue if sales continue declining, as was the case in the most recent quarter, as well as in the month of June.
The company increased its dividend in each of the past three years. It pays a dividend yearly, rather than the more common quarterly payments of American companies.
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