We recently published a list of 10 Best Innovative Stocks that Pay Dividends. In this article, we are going to take a look at where Texas Instruments Incorporated (NASDAQ:TXN) stands against the other best innovative stocks that pay dividends.
Innovation plays a crucial role in today’s market. With the significant attention tech stocks have gained over the past year, it’s clear where investors are directing their funds. Tech firms are leveraging disruptive technologies like artificial intelligence to process vast, complex datasets. In the healthcare sector, advancements in research and development (R&D) have led to life-saving drug therapies and treatments. Meanwhile, the growing impact of climate change is pushing energy and utility companies to prioritize renewable energy sources. Therefore, innovation lies at the heart of every industry today.
Businesses in the US and globally swiftly recognized the influence of innovation on their growth and operations, and they are gradually shaping their activities around it. A recent McKinsey survey of over 1,000 executives revealed that companies with a strong culture of innovation are twice as successful as some of their peers in scaling digital transformations. These innovative firms focus on technologies and changes to their operating models that promote rapid learning and adaptation—essential components of innovation. The report also highlighted that 14 of the top 20 global companies have leveraged innovation to either expand existing markets or create entirely new ones.
Read also: Top 18 Automotive Industry Innovations and Trends
A key component of innovation is R&D, which focuses on systematic and scientific investigation to create new products, technologies, or processes. Through R&D investments, companies can strengthen their abilities, explore fresh ideas, and discover innovative solutions to address customer demands. Businesses worldwide, particularly in the pharmaceutical sector, have boosted their R&D investments to develop new products that meet the demands of their customers. Financial Times reported that R&D in the US has grown in recent decades, increasing from 2.2% of GDP in the 1980s to 3.4% in 2021. This rise is mainly due to the private sector’s contribution, which doubled to 2.5% of GDP. Moreover, the percentage of the population involved in patent creation almost doubled during this time.
It’s not just established companies that are embracing innovation in their operations; the rise of US startups also reflects this trend, as they introduce groundbreaking business ideas previously unheard of. Economist John Haltiwanger found that Americans were starting new businesses at an unprecedented rate. And he’s not mistaken. In 2020, more new businesses were launched than in any previous year, with 2021 following closely behind. According to the Kauffman Indicators of Entrepreneurship, the one-year survival rate for these startups exceeded 80% in 2021, marking the highest rate since 1999. Haltiwanger noted that a surge in new businesses is a strong indicator of job creation, innovation, and productivity growth within the economy. He further said that startup booms not only reflect technological innovation but also significantly drive it. Startups explore how to leverage new technologies, experiment with them, and create new products, pushing competitors to adapt and innovate in response. Research from Texas McCombs, which examined 6,116 patents from the mid-1970s to 2016, highlighted the impact of startups on innovation. The study found that patents from startups were cited 8.5% more each year and 21% more over a nine-year period compared to patents from established companies.
Our Methodology:
For this article, we scanned Insider Monkey’s database of 912 hedge funds as of Q2 2024 and picked companies that actively prioritize and promote the development of new and groundbreaking ideas, products, services, or business processes. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them. These companies belong to different sectors, including healthcare, technology, aerospace, and defense.
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).
A robotic arm in the process of assembling a complex circuit board – showing the industrial scale the company operates at.
Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 50
Texas Instruments Incorporated (NASDAQ:TXN) is an American multinational semiconductor company that produces analog and embedded chips. The company is recognized for creating the first commercial silicon transistor in 1954, a breakthrough that transformed the electronics industry. They were also early innovators in integrated circuit development, often referred to as chips or microchips. TI’s integrated circuits were essential in reducing the size of electronic components and advancing modern computing and communication technologies. Additionally, the company launched the first handheld electronic calculator, the TI-2500, in 1967. It is among the best innovative stocks that pay dividends.
The analog chip industry is facing one of its most significant downturns, and Texas Instruments Incorporated (NASDAQ:TXN) is struggling to manage this difficult period. Despite the challenges, the company is making progress with its resources. Over the past year, it has invested $3.7 billion in research and development (R&D) and selling, general, and administrative expenses (SG&A), spent $5.0 billion on capital expenditures, and returned $4.9 billion to shareholders. The company has also updated its forecasts for free cash flow per share under different recovery scenarios for 2026, projecting a range of $8 to $12. Its strong track record of cash flow and dividend growth continues to make it a solid long-term investment.
In the second quarter of 2024, Texas Instruments Incorporated (NASDAQ:TXN) generated $1.6 billion in operating cash flow and its free cash flow was $507 million. The company returned over $1.1 billion to shareholders through dividends. In addition to its commitment to shareholder return, Texas Instruments also practices dividend growth. The company’s dividend growth streak currently spans over 12 years. It pays a per-share dividend of $1.30 every quarter and has a dividend yield of 2.57%, as of September 18.
As of the close of Q2 2024, 50 hedge funds owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), up from 49 in the previous quarter, as per Insider Monkey’s database. These stakes are collectively valued at over $2.7 billion. With over 4.2 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q2.
Overall, TXN ranks 8th on our list of best innovative stocks that pay dividends. While we acknowledge the potential for 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 timeframe. 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: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.