01/13/2014 8:00 am EST
Our favorite idea for speculative investors in 2014 is the world leader in 3G, 4G, and next-generation wireless technologies, explains Ingrid Hendershot, editor of Hendershot Investments.
Qualcomm (QCOM) reported record revenue for fiscal year 2013 of $24.9 billion, an increase of 30% over the prior year. Earnings for the 2013 fiscal year increased 12% year over year to $6.85 billion, or $3.91 per share.
Qualcomm's return on equity increased to 18.9% for fiscal 2013, with no long-term debt, and $29.4 billion in cash and marketable securities on the strong balance sheet, as of year end. Free cash flow of $7.7 billion increased 64% over the prior year.
Qualcomm returned $6.7 billion in capital to shareholders in fiscal 2013, by increasing its dividend for the eleventh straight year and repurchasing 71.7 million shares of stock for $4.6 billion. Qualcomm plans to repurchase another $4 billion of stock in fiscal 2014.
In the future, Qualcomm plans to return 75% of free cash flow to shareholders through opportunistic stock buybacks and increased dividends, which are expected to continue to grow faster than earnings.
The $1.40 annual dividend currently yields 1.9%. Management projects that revenue for fiscal 2014 will be in the range of $26.0 and $27.5 billion, representing 5%-11% growth. Earnings are forecasted in the range of $4.25-$4.45 per share for the 2014 fiscal year, representing growth of 9% to 14%.
Qualcomm believes the company can generate double-digit compound average growth for revenues and earnings for, at least, the next five years.