Qualcomm: Chips to power next-gen connectivity Qualcomm is under pressure due to a set of pending legal issues that includes an FTC antitrust suit and royalty disputes with Apple totaling claims of more than $1 billion. Its stock has lost roughly 15% year to date as these issues threaten its earnings and present potential long-term challenges for its business model. The chipmaker's stock now trades at roughly 13 times forward earnings estimates, which looks like an attractive entry point even in light of its legal troubles.
Qualcomm was one of the most influential players in the mobile revolution, collecting revenue on most cellphones and tablets sold by way of either having chips in the hardware or from licensing fees, and it's now in a position to play a big role in powering the Internet of Things. The company will likely be a leading supplier of mobile baseband chips (the hardware that mobile devices use for internet connectivity) for the next generation of devices that will connect through 5G network technology, which should boost sales volume and margins.
 IMAGE SOURCE: QUALCOMM.
Qualcomm's expertise in high-performance, low-power-consumption processors will also likely give it an edge in IoT devices, including wearables, home appliances, mixed reality hardware, and drones. Connected cars present another big opportunity, with the company on track to become the leader in the space and expand its overall addressable market roughly 40% by 2020 if it closes its acquisition of NXP Semiconductors.
Looking at the income side of things, Qualcomm's dividend yields 4.1%, and the chip giant has boosted its dividend annually for 14 years running -- delivering an average annual payout increase of 17% over the last decade. With the company in acquisition mode, there's reason to think that it won't sustain that level of dividend growth. But it's already got a great yield, and its payout history suggests that investors can count on dividend increases going forward. |
