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Dividend Investing Stocks (Archived)

QCOM - QUALCOMM, Inc.

Dividend investing is a popular strategy with investors seeking an income stream. Dividend investors can be placed into two broad categories.

  1. The growth approach - buy dividend paying stocks with emphasis on the company's ability to grow and increase its future dividend payments (to maximize the future yield).
  2. The yield approach - buy dividend paying stocks at cheap prices (to maximize the current yield).

Dividend investors using the growth approach tend to look for the same basic growth characteristics as found with growth investing, but the stock must also pay a reasonably reliable dividend.

Dividend investors using the yield approach tend to be more concerned with the stock price and the companies ability and willingness to pay a regular dividend rather than its ability to expand.

Sometimes a company will satisfy the requirements for both approaches.

In the February 2015 issue a fundamental analysis is conducted on a selected sample of stocks. The analysis is based on fundamental data from one year ago. This allows financial students and investors to see how the stock price performed over the next 12 months after the hypothetical purchase.

QUALCOMM, Inc.

QUALCOMM, Inc. NASDAQ:QCOM is a large-cap telecommunications equipment company and its stock trades around $725 million per day. QCOM is a mature company that was founded in 1985 and has a long established history of paying dividends.

The key fundamentals for QCOM are shown below.

Growth fundamentals for QCOM

YearRevenueEPS ROEDividendBook ValueEmployees
200448801.05 18%0.235.907600
200556701.30 19%0.346.809300
200675201.50 18%0.458.1011200
200788702.04 21%0.549.6012800
2008111001.93 18%0.6210.8015400
2009104000.95 8%0.6712.2016100
2010109002.04 16%0.7412.9017500
2011149002.53 16%0.8416.0021200
2012191003.59 18%0.9619.7026600
2013248004.03 19%1.3021.4031000

The fundamental data above shows that QCOM has broadly increased its revenue, earnings, book value and employees over the last decade. These are the characteristics of an expanding company which indicates that QCOM is a growth stock that pays a regular dividend. Also the annual dividends have increased over the last decade.

Fundamental Analysis for QCOM:

The return on equity is quite good and general is in the 10% to 20% range. The profit margin (profit to revenue ratio) is very good and averages around 30%.

The current ratio (current assets to current liabilities) averages around 4.0 which indicates that QCOM has a surplus amount of working capital.

The debt ratio (long-term debt to tangible assets) averages around 0.2 which means that QCOM carries hardly any long-term debt. Intangible assets and goodwill are not included in the ratio calculation. The tangible assets are used for the ratio calculation because these are hard physical assets that can be sold off in the event of bankruptcy liquidation whereas intangibles and goodwill cannot be sold.

The total ratio (total liabilities to total assets) averages around 20% which means that QCOMs total debt is 20% of its total assets.

The earnings growth for the 2013 fiscal year is projected to grow at 19% (based on the five year earnings growth trend). The revenue is projected to grow at 16% (based on the five year revenue growth trend).

The forward PE ratio is around 15 (calculated from the five year earnings growth trend rather than from forecast earnings). The forward PEG is around 0.8.

The bankruptcy risk can be calculated using the Z-score. QCOMs Z-score is 9.1 which means QCOM is a very low bankruptcy risk stock.

The current business valuation would drop to around $54 if QCOMs earnings growth stops (with a 2.8% ten year Treasury bond yield).

QCOMs book value is around $21 and if QCOM does run into financial problems in the future this gives an idea of how far the stock price could drop.

The sample analysis uses data that is one year old. The hypothetical purchase date for the stock is 17-Jan-2014 and this allows the reader to see how the stock performed over the next year.

Overall the fundamentals are very strong with this large-cap dividend paying stock which has growth characteristics as a bonus. Additional information such as consensus forecast earnings, broker recommendations and insider transactions are not considered for this sample analysis. A hypothetical position taken in QCOM on the 17-Jan-2014 would give a purchase price of around $25.

The stock price performance is shown below in Chart 1. along with the annual earnings year to year growth. The stock chart is adjusted for splits and dividends.

Chart 1. Stock chart with earnings for QCOM

weekly Chart QCOM

As shown in Chart 1. above, QCOM lost around 5% over the next year including dividends. QCOMs 2013/09 full year earnings increased by 18% over the 2012/09 full year and its dividends were $1.61 which is an increase of 24% over the 2012/09 full year.

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Stock Analysis for Finance Students and Investors