Texas Instruments Incorporated (NASDAQ:TXN) stands out as a favorite among long-term dividend investors. The company’s analog chips and embedded processors power everything from industrial machines and cars to data centers and home electronics. Because these products stick around for years, Texas Instruments enjoys steady repeat business and a real edge over competitors, thanks to its manufacturing know-how, engineering talent, and strong customer ties. These qualities also explain why the company often features in discussions of durable income-generating businesses, including Top 10 Unstoppable Dividend Stocks to Buy. Still, investors have to pay a premium for that kind of stability. Still, investors have to pay a premium for that kind of stability.
Texas Instruments’ forward P/E is 27.55, while its trailing P/E sits much higher at 41.43. That gap shows investors expect earnings to bounce back from last year’s lower numbers.
Find TXN among 10 Reliable Dividend Stocks to Buy for Long-Term Investors
1. Earnings recovery is real, but not risk-free
The most recent quarter backs up the idea that things are turning around. In Q2 2026, revenue jumped 23% year over year to $5.46 billion, and net income surged 53% to $1.98 billion. Operating profit also climbed 48% to $2.31 billion, pushing operating margins to about 42.3%. Strong demand from factories, data centers, and automakers drove those gains.
Cash flow got a boost too. Over the past year, Texas Instruments Incorporated generated $6.53 billion in free cash flow, though that total includes $1.18 billion from CHIPS Act incentives. That’s important because manufacturing investments, depreciation, and when government incentives hit the books all play a role in how much cash is left for dividends and buybacks.
2. Forward P/E: better than the past, but not a bargain
At a forward P/E of 27.55, TXN now trades higher than its forward multiples of 25.58 at the end of 2025 and 26.25 in September 2025, according to Yahoo Finance. The even higher trailing P/E of 41.43 highlights just how much last year’s earnings were weighed down compared to what’s expected going forward.
That forward P/E means investors are getting an earnings yield of just 3.63%, not great when you compare it to the 5.2% yield you could get from a 10-year Treasury in mid-October. And while Treasury payouts are rock solid, Texas Instruments’ profits can swing with the business cycle. The company could still deliver solid returns if it keeps growing earnings and raising the dividend, but the current price gives investors less cushion if things don’t go as planned.
Looking at the competition, it’s easy to see why a little caution is smart. Analog Devices, for example, traded at about 23.2 times forward earnings, well below Texas Instruments’ 27.55. TXN’s bigger scale and wide range of analog products might explain the higher price, but to keep that edge, the company will need to deliver more than just a return to normal demand. Sustained earnings growth is a must.
3. Dividend growth meets a demanding price
In September, TI announced it was bumping its quarterly dividend up by 7% to $1.52, or $6.08 per year. Based on the October 16 share price of $276.48, that’s a forward yield of about 2.2%. The company’s payout ratio sits at around 85%. A comparison with other established dividend payers, such as those featured in our unstoppable dividend stocks list, also puts TXN’s modest 2.2% yield into perspective.
TI’s 23-year track record of raising its dividend and its growing cash flow make it appealing for income-focused investors. But with a payout ratio this high, there’s not much room for earnings to slip without putting the dividend at risk. Big spending on factories and the ups and downs of industry demand are still key risks, especially if the recovery loses steam.
Bottom line
Texas Instruments brings real long-term strengths and a steadily rising dividend to the table, but today’s valuation means it can’t afford to stumble. With a forward earnings yield lower than Treasuries and a high payout ratio, the case for buying in now relies mainly on the company’s ability to keep growing its profits and raising its dividend.
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This article is originally published at Insider Monkey.
