Printed on August 1st, 2022 by Quinn Mohammed
There is no such thing as a precise definition for blue chip shares. We outline it as a inventory with at the very least 10 consecutive years of dividend will increase. We consider a longtime observe report of annual dividend will increase going again at the very least a decade, reveals an organization’s means to generate regular development and lift its dividend, even in a recession.
Consequently, we really feel that blue chip shares are among the many most secure dividend shares that buyers should purchase.
With all this in thoughts, we created a listing of 350+ blue-chip shares which you’ll be able to obtain by clicking under:
Along with the Excel spreadsheet above, we’ll individually assessment the highest 50 blue chip shares as we speak as ranked utilizing anticipated whole returns from the Certain Evaluation Analysis Database.
This installment of the 2022 Blue Chip Shares in Focus collection will analyze the pc expertise firm Qualcomm (QCOM).
Qualcomm, first generally known as “High quality Communications”, began in 1985 by Dr. Irwin Jacobs. At the moment, the corporate offered a product and repair which enabled long-haul trucking corporations to find and message drivers.
At present, the corporate develops and sells built-in circuits to be used in voice and information communications. The chip maker receives royalty funds for its patents utilized in gadgets which are on 3G and 4G networks.
Qualcomm is the world’s largest wi-fi chip vendor and provides the vast majority of handset makers with modern processors. It additionally sells RF-front finish modules to be used in smartphones, and chips for automotive and Web of Issues (IoT) markets.
Qualcomm reported third quarter FY 2022 outcomes on July twenty seventh, 2022. Revenues soared 36% to $10.9 billion. Adjusted earnings-per-share of $2.96 was 54% increased than the $1.92 within the earlier 12 months.
Supply: Investor Presentation
Revenues for Qualcomm CDMA Applied sciences, or QCT, grew 45% to $9.4 billion. Handsets, RF front-end, Automotive, and Web of Issues grew 59%, 9%, 38%, and 31%, respectively. Qualcomm Know-how Licensing, or QTL, was increased by 2% to $1.5 billion.
In the course of the quarter, Qualcomm repurchased 4 million shares for $500 million. Moreover, the corporate returned one other $842 million in dividends to shareholders.
Management revised its 2022 steerage and sees whole revenues coming in between $11.0 billion to $11.8 billion. Adjusted earnings-per-share of $3.00 to $3.30 is anticipated for the fourth quarter.
We estimate that Qualcomm can generate $12.54 in earnings-per-share for the complete fiscal 12 months 2022.
Qualcomm is a mature expertise firm and has grown its earnings-per-share at roughly 6.6% per 12 months during the last decade. In the newest quarter, the corporate skilled sturdy development throughout all 4 of its primary segments. The corporate will proceed to deal with rising every of its divisions, being handsets, RF front-end, automotive, and Web of Issues.
The corporate’s Snapdragon chips are thought of the premium and high-tier smartphone chip for Android gadgets. Development in demand for 5G will even profit the corporate’s handset division, and the corporate anticipates that 5G handset shipments will attain about 85% of whole handset shipments in 2024, from about 40% in 2021. Qualcomm estimates that their serviceable addressable market will develop from $33 billion in 2021 to $46 billion in 2024, a 12% compound annual development charge.
The automotive phase has the strongest rising serviceable addressable alternative (SAM) out of all divisions. Qualcomm anticipates the automotive SAM to develop by 36% every year from 2021 into 2026, from $3 billion to $14 billion. The design-win pipeline has reached $13 billion, and the corporate plans to capitalize on an elevated demand for telematics, connectivity, and digital cockpit content material, together with autonomy.
A further increase to earnings-per-share will likely be achieved with continued share repurchases. The corporate has on common and over the long-term repurchased roughly 5% of its excellent shares per 12 months.
Lastly, Qualcomm can develop via strategic acquisitions. One such latest acquisition is NUVIA, a world-class CPU and expertise design firm, which Qualcomm bought for $1.4 billion. With NUVIA, Qualcomm expects to create and launch a brand new set of high-performance computing platforms. These next-gen CPUs will likely be built-in into flagship smartphones, laptop computer, digital cockpits, advancer driver help methods, prolonged actuality, and infrastructure networking options.
We anticipate Qualcomm will develop earnings-per-share at a charge of seven% yearly within the intermediate time period.
Aggressive Benefits & Recession Efficiency
Qualcomm’s main place in its industries and greatest in-class Snapdragon processor are the corporate’s most vital aggressive benefits. This management place affords the corporate considerably of a moat. The Snapdragon processor is a frontrunner in efficiency within the smartphone world. It is also the processor discovered within the majority of Android handsets.
The corporate is just not resistant to recessions, as demand for the merchandise the place Qualcomm gives inside elements can fluctuate relying on the general financial surroundings. Nevertheless, Qualcomm’s semiconductors are concerned and built-in in a really big selection of merchandise, so there’s some resilience. In the course of the nice recession, the corporate suffered a close to 16% decline in its earnings-per-share, which in contrast favorably to a large amount of corporations which had been extra considerably impacted.
These qualities have enabled Qualcomm to develop its dividend yearly for 20 years. During the last 9 years, the dividend grew at practically 13% per 12 months, and within the final 5 years, the dividend grew at practically 6.5% per 12 months. We estimate that the corporate can proceed rising the dividend according to earnings development.
Valuation & Anticipated Returns
Shares of Qualcomm have traded for a mean price-to-earnings a number of of round 15.6 and 17.0 during the last ten and 5 years, respectively. Shares are actually buying and selling under this common, which signifies that shares may very well be undervalued on the present 11.6 occasions earnings.
Our honest worth estimate for Qualcomm inventory is 16.0 occasions earnings. If this proves appropriate, the inventory will profit from a 6.7% annualized achieve in its returns via 2027.
Shares of Qualcomm at present yield 2.1%, which is under its common yield of round 3%. On a dividend yield foundation, QCOM shares appear to be buying and selling above honest worth.
The present dividend payout is satisfactorily coated by earnings, with room to develop. Based mostly on anticipated fiscal 2022 earnings, QCOM has a payout ratio of solely round 25%. We anticipate continued excessive single-digit dividend will increase within the years to come back.
Placing all of it collectively, the mix of valuation modifications, EPS development, and dividends produces whole anticipated returns of 15.6% per 12 months over the following 5 years. This makes Qualcomm a purchase.
Qualcomm is the world’s largest wi-fi chip vendor and provides the vast majority of handset makers with modern processors. The corporate has elevated its dividend for 20 consecutive years, and we see this development persevering with.
The corporate’s chips are concerned in quite a lot of expertise markets, and the corporate’s development thesis stays intact. The two.1% dividend yield is just not spectacular by itself, however mixed with development and the potential valuation tailwind, whole returns are strong.
With sturdy whole return expectations of 15.6% per 12 months over the following 5 years, Qualcomm inventory is a purchase for long-term dividend development buyers.
The Blue Chips listing is just not the one strategy to shortly display for shares that frequently pay rising dividends.