There is a specific kind of torture in watching a stock you own do absolutely nothing for five years — no capital gains, modest dividends, analysts questioning the thesis — while the rest of the market runs hot. Then, one morning after an earnings call, it gaps up 18% before you’ve finished your coffee. That’s what happened this week with Texas Instruments (TXN) and it’s worth talking about properly.
Derek and EDGI covered it on Episode 293 of Dividend Talk — a genuinely packed earnings-season opener that also took in Intel’s (INTC) surreal tripling in share price, Tim Cook’s exit from Apple (AAPL), a brace of strong European earnings from Mensch und Maschine (MUM.DE) and L’Oréal (OR.PA), VOPAK’s (VPK.AS) infrastructure update, Procter & Gamble’s (PG) sluggish quarter, plus twenty listener questions on everything from dividend reinvestment strategy to whether Wero can put a dent in Visa (V) and Mastercard (MA).
But the Texas Instruments story is the one worth sitting with.
| Segment | Q1 2026 Performance (YoY) | Context |
| Total Revenue | $4.8 Billion (+19%) | Beat the top end of guidance |
| Data Center | +90% Growth | Driven by AI infrastructure builds |
| Industrial | +30% Growth | Their single largest end market |
| Analog Chips | +20% Growth | Critical for high-voltage power & cooling |
Why Five Years of “Dead Money” in TXN Was Actually the Setup
EDGI has held Texas Instruments at an average cost of around $170. The stock spent years oscillating between $140 and $200 while the company was ploughing capital into new fabrication capacity under what investors broadly call its capex cycle. During that period, free cash flow dropped well below what was needed to fully cover the dividend. Yield on cost sat around 3.3%. The share price went nowhere.
“Flat for five years,” EDGI said. “And then suddenly in the last week it bumped up 18% after earnings — the highest one-day gain since the dot-com bubble.”
The share price hit $277 at time of recording.
What changed? Two things converged at once. Capital expenditure is now tapering down — the heavy-spending winter of the cycle is ending. And demand arrived exactly where Texas Instruments needed it: industrial customers and data centres.
Revenue came in at $4.8 billion, up 9% on the prior quarter and 19% year-on-year. Analog revenue grew 20% year-on-year. Industrial demand — their single largest end market — jumped more than 30%. The question an analyst posed on the earnings call was the one dividend investors will recognise: isn’t 30% growth just pull-forward demand rather than a sustainable run rate? The CEO’s answer was instructive. No, he said. We are still below the long-term trend. The COVID disruption pushed customers under where they should have been, and we are only now normalising back toward it. Data centre revenue grew 90% year-on-year.
Free cash flow, for the first time in several years, covered the dividend again.
Understanding the Capex Cycle Before You Write Off a Stock
There is a reading of the Texas Instruments story that looks like a lucky outcome — the AI and data centre boom arrived just in time to validate a thesis that was running out of patience. Derek acknowledged as much.
“The timing of the data center and the AI boom helped them a lot here, let’s be honest. But that data center growth is there for me for the next four, five, six years.”
The more useful reading, though, is about what the capex cycle actually means and why it matters for dividend investors specifically. Texas Instruments made a deliberate decision to invest heavily in domestic manufacturing capacity — partly in anticipation of structural chip demand, partly in response to the CHIPS Act incentives from the US government. That spending hit free cash flow hard. But it did not hit the business.
EDGI flagged one piece of accounting to watch: TXN received $555 million from the CHIPS Act during the quarter and deducted this from their reported capex number in the headline figures, making the free cash flow picture look cleaner than the raw capex figure of around $660-675 million would suggest. Worth noting — but also worth noting that this was a deal made under those terms, and the investments were sized accordingly.
“I was impressed by the numbers,” EDGI said. “I’m not surprised they bounced — but 18% on such a juggernaut you don’t see that often. Maybe this is also a little bit like recalibrating where the price should have been in the first place.”
When to Let Winners Ride and When to Trim
The question a listener named Mark put directly: after a 60%+ run from cost basis and a major single-day jump, how do you maintain the discipline to hold?
EDGI’s answer cuts to a principle worth keeping: you don’t value a company at today’s earnings when those earnings are still distorted by a capex cycle wind-down. If you look at Texas Instruments on a simple earnings-per-share basis right now — perhaps $6-7 for the year times a 20 multiple — you get a figure well below the current price. But that’s the wrong frame. The write-offs are still working through. The industrial demand recovery has, by the CEO’s own account, further to run. And unlike Intel (INTC), which went through its own brutal capex cycle with no demand to meet it on the other side, Texas Instruments is seeing the orders come in.
Derek drew the comparison pointedly: “Much better than Intel. They were going through the capex cycle and there was nothing accelerating.”
For Derek personally, it now feels like his old Microsoft (MSFT) anchor-price problem in reverse — he bought a small position at $190, watched it surge faster than expected, and now has to decide whether the lesson is to hold or to take some off the table.
The default, for EDGI, is clear: “Let these winners ride.”
The Broader Earnings Picture — and What Beauty Is Telling Us
The Texas Instruments story was the most technically interesting discussion in Episode 293, but it sat alongside a pattern worth naming. Several of the week’s earnings reports pointed to the same sectoral divide.
L’Oréal (OR.PA) reported 7.6% like-for-like sales growth, with professional products up 15.5% and dermatological products up 10.8%. EDGI had barely finished the numbers before pointing out that Procter & Gamble (PG) — reporting the same week — showed beauty products up 11% organically while most of its other segments grew between 1% and 3%. P&G’s overall organic growth came in at 3%, well within what inflation can explain away.
“Beauty is just a gold mine right now,” EDGI said. “And that’s what’s pulling P&G’s numbers up.”
Procter & Gamble’s share price has risen roughly 10.5% over five years — another five-year flat chart. But unlike Texas Instruments, there is no capex cycle to explain the sluggishness and no obvious catalyst on the other side of it. EDGI’s concern is structural: at 21 times earnings for a company that can barely beat inflation in most of its categories, the multiple looks stretched. And instead of paying down $24 billion in long-term debt — some of which is coming due this year at higher rates — the company is committing virtually all free cash flow to dividends and buybacks. A 1.5% buyback yield on a $346 billion market cap is not the same thing as cleaning up the balance sheet.
Over in European industrial software, Mensch und Maschine (MUM.DE) told a different story. The Autodesk-linked German company posted record sales, record EBIT, and a record dividend — a 10% hike, putting them on track for €2.20 next year. Their revenue headline fell 27%, which looks alarming until you understand that Autodesk switched from a resale model to a commission model, deflating the top line while the actual business value — gross profit and free cash flow — improved.
Payout ratio sits near 100% on reported earnings. That also sounds alarming. But the company books around €29 million a year of software development as an operating expense rather than capitalising it, which depresses reported net profit. Adjust for that and the free cash flow payout ratio is 40-50%. Not a concern.
This Week’s Dividend Hikes
Parker Hannifin (PH): 11% increase — 71 consecutive years of dividend growth Nasdaq Inc. (NDAQ): 15% increase — stock exchange businesses with strong earnings power Otis Worldwide (OTIS): 4.8% increase — quarterly dividend raised to $0.44 per share Qualcomm (QCOM): 3.4% increase Air Products and Chemicals (APD): 1.1% increase IBM: 0.6% increase — seventh consecutive year of a 1-cent hike
IBM’s increase is the most debated. It keeps the Dividend Aristocrat status intact. Whether that counts as a dividend growth story or a technical formality is a fair question.
Listen to the full Episode 293 of Dividend Talk, including twenty listener Q&As covering dividend reinvestment (DRIP), withholding tax optimisation, European stocks Americans overlook (Siemens SIE.DE, Roche ROG.SW, Novartis NVS, Sanofi SNY, Schneider Electric SU.PA), the insurance sector deep-dive (Munich RE MUV2.DE, ASR Netherlands ASRNL.AS), Rubis (RUI.PA), Paychex (PAYX), the Wero vs Visa (V)/Mastercard (MA) debate, and how to actually use AI tools in your investment process without outsourcing your thinking.
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Derek and EDGI are the co-hosts of Dividend Talk, a European dividend investing podcast. Nothing in this post or on the podcast constitutes financial advice. Always do your own research.
