Last week Skyworks Solutions (SWKS) announced it would double its quarterly dividend to $0.26, which works out to $1.04 on an annualized basis or about a 1% yield. I believe that the company's strong financial results, combined with the increased dividend and stock buyback will keep the stock going higher.
Year to date, Skyworks has posted mind-boggling results. First-quarter revenue grew 59.4% and the second quarter grew 58.4%. But back half estimates seem low to me. Analysts are expecting just 36.5% revenue growth in the third quarter and only 20% in the fourth. That means, for the year, Skyworks will only post 41% revenue growth, or $3.2 billion in revenue.
When you look at fiscal 2016 estimates, Wall Street expects the company to grow by only 12.9%, to $3.6 billion. I find those estimates hard to believe. I know the chipmaker gets a lot of its revenue from Apple (AAPL), but I don't see sales slowing that quickly, especially with strong sales of the iPhone 6 in China and the continued rollout of 4G LTE worldwide.
The company reported second-quarter earnings-per-share growth of 86% on an operating margin of 34%. Net income was up 99%. Since 2010, Skyworks has grown operating margin 700 basis points and gross margin 220 basis points. That doesn't sound like a company growing revenue at 13%.
According to Cisco Systems (CSCO), mobile data is projected to grow at a compounded annualized growth rate of 57% from 2014 to 2019. The wireless industry will add about 2.5 billion 4G LTE connections through 2019. Skyworks is in the sweet spot of those trends. And not to mention, the company is an early leader in the Internet of Things, which could provide additional growth over the next five years.
Skyworks appears poised to grow topline revenue in the mid 20% range, which would be similar to 2014. If the company were to do that, it would report earnings per share of more than $6, which I believe would drive the stock above $130.