We recently compiled a list of the 10 Dividend Stocks For Steady Income. In this article, we are going to take a look at where Texas Instruments Incorporated (NASDAQ:TXN) stands against the other dividend stocks.

Generating income has consistently been a primary goal for investors. To achieve this, they often opt for investments that provide steady and reliable returns over time. Dividend stocks are particularly popular in this regard, as they are well-regarded for offering regular income. Although using cash payouts from a stock portfolio is a popular approach among individuals nearing retirement, building an equity income portfolio is an option available to anyone. Over the years, dividends have significantly enhanced investors’ overall returns, making these stocks a compelling choice for income-focused portfolios. In certain periods, especially when equity returns fell below 10%, dividends have accounted for more than half of the total returns of major market indices, according to LSEG data.

Investors are increasingly emphasizing the quality of a company’s earnings. Examining factors such as dividends per share, dividend growth, and the stability of dividend payments can provide valuable insights into a company’s financial stability. Those who prioritize businesses with lower debt levels and higher profitability often target well-established, financially robust firms with greater flexibility. These high-quality companies typically demonstrate stronger resilience during market downturns and are more likely to sustain earnings growth across different market conditions.

Also read: 8 Best Dividend Leaders to Buy According to Wall Street Analysts

According to a report by BlackRock, historically, stocks that consistently grew or maintained their dividends have delivered better performance compared to those that either did not pay dividends or reduced their payouts. During market downturns, dividend-paying stocks often provide a buffer against the volatility of share prices. Companies that issue dividends typically strive to maintain these payments and are generally reluctant to reduce them unless absolutely unavoidable.

When investing in dividend stocks, investors often evaluate the dividend yield. Experts recommend focusing on yields within the 3% to 6% range, as higher yields may indicate potential yield traps. Brian Bollinger, president of Simply Safe Dividends, has also emphasized this point. Here are some comments from the analyst:

“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield.”

He further mentioned that these companies tend to gradually increase their payouts, which can enhance annual income streams and help counter the impact of inflation. Regarding companies with lower yields, he noted that they are often associated with more secure businesses and more reliable dividend payments. For example, the Dividend Aristocrat Index, which monitors companies with at least 25 years of consistent dividend growth, has an indicated yield of 2.28%. According to Bollinger, many of the firms in this index are well-established and financially stable. He suggested that creating a diversified portfolio of these companies can provide reassurance, as it builds a solid foundation for a growing stream of passive income, regardless of market fluctuations. He further said:

“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream. You don’t care so much about the markets’ short-term ups and downs anymore.”

As a result, investors often include dividend stocks in their portfolios.

Our Methodology:

For this list, we first filtered dividend stocks that have shown at least 10 consecutive years of dividend growth. From this group, we selected those with dividend yields above 1.5% as of December 20. Lastly, we chose 10 companies that have achieved a share price return of over 30% over the past five years. The stocks are ranked in ascending order of their dividend yields as of December 20. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Texas Instruments Incorporated (NASDAQ:TXN)

Dividend Yield as of December 20: 2.93%

5-Year Share Price Return: 43.94%

Texas Instruments Incorporated (NASDAQ:TXN) is an American multinational semiconductor company that produces analog and embedded chips. In the third quarter of 2024, the company reported revenue exceeding $4.1 billion, down from $4.5 billion during the same period the previous year. The company posted an operating profit of over $1.55 billion and a net income of $1.36 billion. Its financial position remained robust, with an operating cash flow of $6.2 billion over the trailing 12 months, showcasing the strength of its business model, high-quality product portfolio, and benefits from 300mm production. During the same period, free cash flow totaled $1.5 billion. Over the past year, Texas Instruments allocated $3.7 billion to R&D and SG&A, spent $4.8 billion on capital investments, and returned $5.2 billion to shareholders.

The London Company mentioned TXN in its Q2 2024 investor letter. Here is what the firm has to say:

“Texas Instruments Incorporated (NASDAQ:TXN) – TXN rallied in 2Q despite declining revenue in its latest update. TXN is beginning to see some encouraging signs of destocking nearing an end and some sub segments of the market are experiencing improving demand. TXN continued to spend on capex and should begin to see positive benefits to cash flow next year from the CHIPS Act.”

Texas Instruments Incorporated (NASDAQ:TXN) is one of the best stocks with steady dividends as the company boasts an impressive track record of dividend growth, increasing its payouts for 21 consecutive years. Over this time, the company has achieved a compound annual growth rate (CAGR) of 24% in its dividend distributions. It currently pays a quarterly dividend of $1.36 per share for a dividend yield of 2.93%, as of December 20.

Texas Instruments Incorporated (NASDAQ:TXN) remained popular among elite funds at the end of Q3 2024, with hedge fund positions growing to 57, from 50 in the previous quarter, according to Insider Monkey’s database. The collective value of stakes owned by these funds is roughly $3 billion.

Overall TXN ranks 5th on our list of the best stocks with steady dividends. While we acknowledge the potential of TXN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TXN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.