This post explores how Qualcomm, symbol, QCOM has evolved from an "almost Dividend Machine" to a 2015 Dividend Machine.
How many shares of Qualcomm, symbol QCOM, have passed through my hands? The answer is many, many shares. How many posts have I written about QCOM's potential as an income instrument? More than a dozen posts. But only recently has QCOM become more than an almost Dividend Machine and very good income investment to a bona fide Dividend Machine that will become my latest addition to the 2015 model portfolio.
QCOM has delivered a lot of income
Since I started writing about using dividend stocks and covered calls on those stocks, QCOM has garnered a lot of attention. When I first wrote about QCOM the basis was about $53 http://www.themoneymadam.com/2011/01/qualcomm-option-income.html During these past five years I have bought QCOM, sold calls, pocketed the dividends and call premiums and let my shares be assigned (called away) at very nice capital gains. QCOM a 700 share history
QCOM is a bargain
During these five years QCOM has been volatile, hitting a high of around $82 in September of 2014 and a low of around $47 March of 2011.
At no time during the past five years has QCOM qualified as a Dividend Machine simply because the yield was too low. But now the steady dividend increases and precipitous decline of the stock price make this stock qualify as a 2015 Dividend Machine. QCOM is flirting with five year lows as it trades around $49 today
QCOM Dividend Machine Fundamentals
As you know, for the purpose of this blog, I use only four criteria to select a stock for inclusion in my model portfolios. Whenever a stock's price deteriorates to point where the dividend exceeds 3.5% which is the minimum I require for inclusion in the 2015 portfolio, you know there is some kind of trouble.
A stock like QCOM responds to a myriad of outside factors. China, competition for chips, new technology and on and on. I wish I had the technical skills to siphon through all the externalities, but I do not and therefore, I depend on the four fundamentals that guide my dividend stock selection.
Qualcomm earned $3.20 per share over the past four quarters and paid out $1.92 in dividends. I require a stock to pay more in EPS than in dividends and QCOM makes the grade easily. Their current dividend of $.48 will be paid on December 18, 2015 provided you own the shares by November 27, 2015 the ex-dividend date. The annualized yield is 3.9% which is well above the minimal criteria of 3.5% yield.
Dividend growth is the third of four criteria and again QCOM beats my required dividend growth rate of at least a 4% annual dividend increase over the past five years. QCOM's quarterly dividend 5 years ago was $.19 and their next payment will be $.48. The dividend growth rate has been 30% per year on average which is very impressive. Last of the four criteria is D/E ratio. We don't want our stock to go out of business due to high leverage. I like to see a stock with no more than a D/E ratio of 1 or within industry standard. QCOM's D/E ratio is .341.
QCOM's Dividend Machine Fundamentals are presented in the table below.
QCOM may not be the stock for you. It could succumb to the negative externalities that have rendered the stock price under $50. It could stop the robust dividend growth. It could pile on debt. However, I am going to take my chances on QCOM. It has been a wonderful income investment for me and now it just may become a core holding.
Disclosure: Long QCOM with calls on some of my shares.