By Noel Randewich
SAN FRANCISCO, March 13 Texas Instruments
said on Thursday it plans to return more cash to its
shareholders, expanding a capital management policy that has
helped boost the chipmaker's stock to its highest level in more
than a decade.
Improved manufacturing efficiencies mean Texas Instruments
will now be able to turn between 20 percent and 30 percent of
its revenue into free cash flow, Chief Financial Officer Kevin
March said on a conference call with analysts.
That is more than Texas Instruments' previous free cash flow
target range of between 20 percent and 25 percent of revenue set
In 2013, Texas Instruments promised that, except for money
used to pay debts, it would return all of its free cash flow to
shareholders in the form of dividends and share buybacks in what
FBR analyst Chris Rolland called the "gold standard" of cash
Texas Instruments will now also return to shareholders the
proceeds from the exercise of employee stock options, March
Chipmakers have been growing far less quickly than companies
in other areas of the technology industry, like cloud computing
and social media.
"So now to entice shareholders they're pushing the cash
return story," Rolland said of Texas Instruments and other chip
The changes to Texas Instruments' capital management policy
were incremental improvements but not enough to fuel an
immediate stock rise, Rolland said.
Its firm commitment to dividends and share buybacks over the
past year have helped push the company's stock to highs not seen
The stock is up 31 percent over the past 12 months. However,
it slipped 1.3 percent to $45.84 alongside a lower underlying
market on Thursday, after the company announced the new cash
"Our capital management strategy reflects our beliefs that
free cash flow growth is most important to maximizing
shareholder value in the long term," March said.
The chipmaker's ability to generate cash has been bolstered
by growth in its analog and automotive businesses and by
replacing older factories with newer, more efficient ones, he
Last year, Texas instruments paid out $1.18 billion in
dividends and spent $2.87 billion to repurchase stock.
Other chipmakers have also made recent commitments to give
more cash back to investors.
Last week, Qualcomm Inc raised its cash dividend by
20 percent after vowing in November to return 75 percent of free
cash flow to stock holders.
Graphics chipmaker Nvidia Corp in November
increased its cash dividend by 13 percent and announced an
additional $1 billion for its stock buyback program.