Tuesday February 05, 2013
by Ian Wyatt, editor Top Stock Insights
Qualcomm (QCOM) remains at the forefront of communications technology. It pioneered the CDMA standard for wireless communication; it is the leading patent holder for advanced 3G technologies, and has a growing 4G patent base.
It is a catch-all technology stock that is both a growing dividend investment and a supplier to Apple and other handheld manufacturers. So it effectively combines income and growth.
The first stage of the wireless revolution was driven by the need to make voice calls while on the go. However, the next stage will be different.
Phones and mobile devices are more about gathering information faster, as opposed to voice. The widespread growth of 3G/4G technologies will help this stage develop quicker because faster connections pave the way for better features on handhelds.
According to Wireless Intelligence estimates, the number of global 3G/4G connections reached 1.9 billion and could reach four billion in 2016.
Though Apple is a major customer, Qualcomm has a diverse base that includes Nokia's Lumia, Samsung's Galaxy, Sony's Xperia and Google's Nexus. So it stands to benefit from the mobile trend, as well as Apple device successes.
Apple may have provided gloomy iPhone 5 guidance in January. However, the long-term trend still favors mobile devices. Moreover, the real growth will be from emerging countries. Once Apple matures in China, Qualcomm will also see a huge increase in sales.
Qualcomm develops the technology that wireless companies need to power their businesses. Then it licenses that technology out across the entire wireless industry, providing it to everyone both large and small.
Not only does this approach benefit Qualcomm -- which charges a license fee -- consumers have more choices because mobile manufacturers can focus on building great products as opposed to stuffing money in designing wireless technology.
As consumers buy more products, Qualcomm receives a portion of that revenue, allowing them to stick more money into the research and development of another new wireless innovation.
Of course, not all that money is earmarked for innovation. Qualcomm has been consistently raising the dividend payout since 2004; it currently yields 1.5%.
The company has authorized a $4 billion share repurchase program in addition to its dividend. It spent $1.3 billion buying its own stock ($58 average price) in 2012. The company has spent $10.8 billion in repurchases and paid out more than $8.7 billion as dividends since 2003.
Qualcomm ranks in the top 10% of non-financial companies for financial performance on a one-year and two-year basis. In fact, the company has a top-rank for revenue and earnings growth category.
In addition to the impressive growth and profitability, Qualcomm is in impeccable financial health. The company has more than $12 billion in cash and no long-term debt. In addition to the growth opportunities, QCOM offers share buyback programs and a growing dividend payout.
Learn more about this financial newsletter at Ian Wyatt's Top Stock Insights.