Texas Instruments Incorporated (NASDAQ:TXN) has raised its quarterly dividend by 7% to $1.52 per share from $1.42, bringing the annualized payout to $6.08. The increase marks the company’s 23rd consecutive year of dividend growth. The new dividend is scheduled to be paid on November 10, 2026, to shareholders of record as of October 30, subject to formal board approval.
The increase is notable because TI is raising its payout while its cash generation has improved. For the 12 months through June 2026, TI generated $8.7 billion in operating cash flow and $6.5 billion in free cash flow, while returning $5.8 billion to shareholders.
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TI’s Improving Free Cash Flow Creates More Room for Dividend Growth
The 7% increase is a stronger signal for income investors than the previous 4% raise. TI is increasing the payout while its cash generation has improved sharply. In the 12 months through June 2026, the company generated $8.67 billion in operating cash flow and $6.53 billion in free cash flow, up from $1.76 billion of free cash flow a year earlier.
That improvement matters because Texas Instruments Incorporated has been investing heavily in manufacturing capacity. Capital expenditures were $3.31 billion over the latest 12 months, down from $4.94 billion a year earlier. TI expects 2026 capital spending of $2 billion to $3 billion, suggesting the pressure from its elevated investment cycle is easing. The dividend also appears increasingly supported by free cash flow. TI paid $5.11 billion in dividends over the latest 12 months against $6.53 billion of free cash flow. That leaves a meaningful cushion, rather than requiring the company to fund the dividend primarily through borrowing or asset sales.
The 23-year record adds another layer of confidence. TI says its objective is to provide a dividend that is both sustainable and growing, and the latest increase is consistent with its stated goal of returning all free cash flow to owners over time.
Dividend Faces a Test From Its Investment Cycle
The main concern is that the dividend still consumes a large portion of free cash flow. Although the latest figures are much better, dividends of $5.11 billion compared with $6.53 billion of free cash flow leave less flexibility than the headline cash-flow growth might suggest. TI also continues to invest billions of dollars in manufacturing capacity.
The dividend yield is another consideration. The new $6.08 annualized payout translates to roughly a 2.3% yield at recent share prices, so investors are relying on continued dividend growth rather than a high current income stream.
There is also a risk that the recent improvement in free cash flow could moderate if TI’s capital spending remains elevated or rises again with its expansion plans. The company says capital expenditures beyond 2026 will depend on revenue and growth expectations, so the cash available for dividends could remain sensitive to its investment cycle.
Bottom line
The 7% dividend increase makes the dividend case stronger than the earlier 4% increase suggested. Texas Instruments Incorporated is now growing the payout at a healthier rate while free cash flow has recovered substantially and capital spending is coming down from its peak.
The key number to watch is the relationship between free cash flow and dividends. At present, TI is generating enough free cash flow to cover the dividend with a cushion, but the payout is still consuming a significant share of that cash. For dividend investors, the next question is whether TI can sustain its improving free cash flow trend as its manufacturing investments continue.
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This article is originally published at Insider Monkey.
