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Qualcomm Ups Its Dividend and Buyback Programs


From the Buzz & Banter: The semiconductor company expresses confidence in its future prospects.

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It's funny: When Qualcomm (NASDAQ:QCOM) announced this morning that it was increasing its buyback program by $5 billion and raising its dividend by 20%, I had a strong feeling of deja vu.

Turns out, it was for good reason. On March 5, 2013, Qualcomm announced a $5 billion buyback and increased its dividend by 40%.

Qualcomm had $2.8 billion on its prior buyback program, bringing its total authorization up to $7.8 billion.

The company's quarterly dividend goes to $0.42 from $0.35 for an annual yield of 2.3% based on yesterday's close.

Qualcomm is reacting very positively to the news, trading up 3%.

I'm quite interested in how the company's results shape up over the next few quarters, given the apparent slowdown in the smartphone and tablet markets, though to be fair, there are offset forces at play such as market-share gains, exposure to high-growth emerging markets, technological advantages, and so forth.

Additionally, under the concept of signal theory (where increases in dividends and buybacks are signals of management confidence in near-term prospects), Qualcomm must be feeling good about something.

Still, just this morning, retailer RadioShack (NYSE:RSH) said it is closing 1,100 US stores after an extremely tough holiday season. Same-store-sales were down 19% as a result of "traffic declines and soft performance in the mobility business." That would make sense as Apple (NASDAQ:AAPL) disappointed on iPhone numbers and Samsung (OTCMKTS:SSNLF) has been soft on the high end. Additionally, US carriers have resorted to cutting prices and basically buying customers from each other -- clear signs of maturity.

However, Qualcomm tends to be a relatively steady ship, so it's pretty much a wash. Additionally, revenue growth expectations seem fairly modest -- 8% this year (ending September 2014) and 9% next year.

Twitter: @MichaelComeau

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