⚠ The Payout Runs at 1.7 Times Free Cash FlowHigh threat

Texas Instruments (TXN) — threat to the moat

Four consecutive years of returning more than the business generated, bridged with debt issuance.

A dividend running at 1.7 times free cash flow is a promise being kept with borrowed money.

Returned versus generated, four years ($M)$6,480M2025 returned$2,938M2025 free cash flow$5,724M2024 returned$1,498M2024 free cash flowBridged partly with long-term debt issuance of $1.20bn in 2025 and $2.98bn in 2024.
A deliberate choice to protect a record through a capital cycle.

TI returned $6.48 billion in 2025 against free cash flow of $2.94 billion, and issued $1.20 billion of long-term debt in the same year.1 The dividend alone — $5.00 billion — was roughly 1.7 times free cash flow. This is the fourth consecutive year in which the payout has exceeded what the business generated after capital spending.

The justification is that the capital cycle is temporary and the dividend record is not, and it holds only while the second half of that sentence stays true. Capital spending is guided to $2–3 billion for 2026 from $4.55 billion, which would close the gap immediately.2

The risk is a cycle that turns down before the capex falls. TI would then face a choice between the record and the balance sheet, and a company that has raised its dividend for 23 consecutive years does not treat that choice neutrally.3

There is no distress here — the balance sheet is strong and the debt is cheap relative to the franchise.

Watch free cash flow against dividends paid, which is the covered-or-not test. It has failed for four years.

References
  1. ReportedTI returned $6.48 billion in 2025 against free cash flow of $2.94 billion, and issued $1.20 billion of long-term debt in the same year.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
  2. ReportedCapital spending is guided to $2–3 billion for 2026 from $4.55 billion, which would close the gap immediately.
    Coverage of Texas Instruments' second-quarter 2026 results, July 2026 — revenue of $5.46 billion, up 23% year over year and 13% sequentially against consensus near $5.24 billion; net income of $1.98 billion, up 53%, and EPS of $2.14, up 52% and above the high end of guidance. By segment, Analog revenue was $4.37 billion (up 26%), Embedded Processing $788 million (up 16%) and Other $310 million (down 2%). Industrial revenue grew more than 30% year over year across all sectors and regions, automotive re-accelerated, and data centre revenue roughly doubled. Management guided third-quarter revenue to $5.65-6.15 billion and confirmed 2026 capital expenditure of $2-3 billion, declining to bias the range toward the lower end. After holding pricing flat through the first half, TI began executing customer-by-customer price increases from the third quarter, extending into the fourth quarter and into 2027, concentrated in Analog. Management has framed free cash flow per share of $8 or more as probable for 2026, having earlier suggested $12. The shares fell after hours. — Q2 2026 · publ. 2026-07-24 · source ↗
  3. ReportedTI would then face a choice between the record and the balance sheet, and a company that has raised its dividend for 23 consecutive years does not treat that choice neutrally.
    Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗
Sources
Generated September 23, 2026