This Dividend Stock Is Down 8% and That Makes It One of the Best Buys of the Year

Key Points
Texas Instruments has raised its dividend for 22 consecutive years.
It is the world's largest maker of analog semiconductor chips.
The company should see higher margins now that its expansion projects are complete.
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Texas Instruments (NASDAQ: TXN) is the world's largest maker of analog semiconductor chips. That makes the company seem out of step these days, given the buzz around artificial intelligence (AI) semiconductor chips.
Many people still think of calculators when they think of Texas Instruments, but the company has a long history of innovation, including the first commercial silicon transistor and the transistor radio in 1954, the first handheld calculator in 1967, and the first microcontroller in 1970.
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The growth of AI isn't a bad thing for Texas Instruments. Its analog chips are the backbone of many data centers. The technology company's sales to data centers grew 70% year over year, CEO Haviv Ilan said in the company's fourth-quarter earnings call. AI servers need high-performance power management and signal-chain chips -- which the company specializes in -- to manage the massive amounts of electricity data centers consume.
Why Texas Instruments is a solid dividend stock
Let's begin with its dividend history, which includes 22 consecutive years of increases, including a 4% raise in 2025. It has a dividend yield, at its current share price, of 2.9%. Over the past decade, the company has boosted its dividend by 273%.
Over the past few years, Texas Instruments has spent $30 billion on a new 300-millimeter semiconductor fabrication facility in Sherman Oaks, Texas. The site, which just began production in December, will primarily focus on mature process chips that are widely used in automotive, industrial, and consumer electronics. Its plan is designed to reduce its exposure to outside foundries, allowing the company to guarantee stable, high-volume production for decades. Keeping that production in the U.S. also helps it avoid tariff concerns.
Even in years when Texas Instruments had heavy capital expenditures (capex), such as the $4.7 billion in capex it spent in 2025, it has had predictable dividend increases. Now that the company has signaled its capex is slowing, from a high of $5 billion to between $2 billion and $5 billion per year, its free cash flow is likely to increase. In 2025, cash flow was $2.9 billion, up 96% from the prior year.
Steady financial progress
In 2025, Texas Instruments reported $17.7 billion in revenue, up 13%, while earnings per share (EPS) increased 4.8% to $5.45.
Unlike many "fabless" competitors, which outsource production to foundries such as Taiwan Semiconductor Manufacturing, Texas Instruments owns and operates the majority of its manufacturing facilities. It has said that by the end of the decade, it plans to produce 95% of its wafers internally. This vertical integration gives it better control over supply chains and significant cost advantages through the use of 300mm wafers, which yield 40% more chips per wafer than the industry-standard 200mm.
The stock's recent dip is a chance for investors to get in on a stock that is reducing costs at the same time it is expected to improve production, a great recipe for continued share price and dividend growth.
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James Halley has positions in Texas Instruments. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing and Texas Instruments. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.