Texas Instruments Raises Dividend By 24%, And It'll Likely Raise Again

As such, the firm reiterated its Buy rating on the shares of Texas Instruments and its $96 price target.

At time of publication, shares of Texas Instruments were up 1.69 percent at $87.50.

Analyst Mark Lipacis noted that the company announced a quarterly dividend of 62 cents per share, up 12 cents and translating to a dividend yield of 2.9 percent. The first dividend payment is scheduled for Nov. 13, 2017.

The analyst noted the dividend yield of 2.9 percent for Texas Instruments compared to the 2 percent for the S&P 500 and marked the second highest in its coverage universe.

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Jefferies also noted that the company's board has authorized a $6 billion buyback program. This is in addition to the $4.6 billion pending from its previously authorized repurchases.

Thus, the firm said Texas Instruments' policy to return 100 percent of its free cash flow to shareholders is the benchmark in the semiconductor sector. This, according to the firm, has translated to a premium valuation multiple, which it said the company can sustain.

Jefferies expects the dividend to grow, as revenues and gross margins expand. The firm said it favors Texas Instrument as a Tectonic Shift play on IoT, and as a beneficiary of a budding U.S. CapEx cycle.

Additionally, the firm sees gross margin tailwinds from increased 300 million capacity utilization. The firm also noted that the company is a market share leader capturing outsized profits in the consolidating analog semiconductor industry.