Texas Instruments (NASDAQ: TXN) dividend is unique among chipmakers for its yield, if nothing else. The stock yields over 3.15%, which is double or better than the rest of the field, and it is a safe and growing distribution. 

[content-module:DividendStats|NASDAQ:TXN]The dividend alone may not be a reason to buy the stock but the opportunity becomes more attractive when you add the outlook for business recovery and upward pressure from analysts' revisions. In this scenario, the stock price could trend higher over the next 12 to 18 months, driven by revenue, earnings recovery, and an upwardly-trending consensus price target. 

Texas Instruments is unlikely to see an AI-powered boost like NVIDIA (NASDAQ: NVDA) or Advanced Micro Devices (NASDAQ: AMD), but it is tracking toward end-market normalization and a return to growth, and AI is in the picture. Texas Instruments focuses on edge and vision applications, which are central to the second wave of AI.  

Texas Instruments: The Dark Time Before the Dawn

Texas Instruments struggled in Q1, but the details and outlook suggest this is the dark time before the dawn. Revenue is down 16.4% for Q1 due to weakness in all segments, and guidance expects another quarter of contraction. Still, in alignment with expectations, the contraction will slow, and expected end-market normalization will soon turn into a tailwind that drives growth. The Other segment was weakest segmentally, with a contraction of 33%. Embedded fell by 21.6% and Analog by 14%.

Margin news is bad, but not as bad as expected. The company's gross margin contracted by 820bps, compounded by deleveraging operating costs, to leave the GAAP earnings down 35%. The GAAP earnings include a 10-cent favorable impact from unexpected items, leaving the adjusted EPS at $1.20, down 75 cents from last year, or 40.5%. 

As bad as the impact of contracting business is, the company is still in solid financial shape and paying dividends. The cash flow was negative for the quarter due in part to investment in production and inventory, both of which are up - increased assets offset the cash decline. Debt is also up but well within safe levels. The increase helped position the company for its recovery and left the leverage ratios in a fortress condition. Total liabilities are only 1.1x equity, and long-term debt is about 0.75x equity. 

Analysts Lead Texas Instruments to New Highs

[content-module:CompanyOverview|NASDAQ:TXN]The analyst response to Texas Instruments Q1 release is favorable to shareholders. The 7 analysts tracked by Marketbeat in the first few hours following the report included reiterated ratings and price targets and five upward revisions. The range of targets runs from just below the consensus to $210, assuming the stock is fairly valued at current levels with a chance of moving higher. 

The consensus rating is flat compared to last year, but it is rising from a bottom formed earlier this year, providing a tailwind for the market. If this trend continues, shares of TXN will likely move higher as the year progresses. Analysts at JPMorgan expect the company to drive "a continued recovery profile into 2H of the year and into 2025," a situation that will lead analysts to raise targets. JPMorgan's new target is $195, 10% upside and a multi-year high.  

Texas Instruments Moves Up Within a Range

Texas Instruments is moving higher but may have difficulty setting a new all-time high until later. The market faces stiff resistance at multiple levels within a trading range that could cap gains. However, assuming the recovery shows traction later in the year and analysts respond favorably, a sustained uptrend is possible. In this scenario, the price action in TXN stock could increase incrementally within the range, testing and tackling resistance at $185, $190, and $200 on its way to a new all-time high. The risk is that the recovery will take longer than expected, leading to volatility within the range.