Amid the Crisis, This Tech Stock Should Keep Its Dividend Strong

In the last several weeks, we've seen a number of companies announce a suspension or cut to their dividends to preserve capital as they continue to grapple with the economic impact of the current pandemic and uncertain prospects for when economies around the world will not only return to normal, but in some cases simply open. We're likely to see more dividend cuts, particularly among sectors like restaurants and retail, which are heavily tied to discretionary consumer spending and are grappling with limited service given the pandemic. A number of tailwinds, however, continue to blow despite the outbreak -- and dividend-increasing companies riding those winds are likely to stay on track. One such company that might benefit is Qualcomm . But to understand why, we should step back and look at the big picture as to why Qualcomm should remain on its dividend-increasing flight path. One of the burgeoning technology upgrades is tied to 5G, which is the next generation in mobile technology that -- like its predecessors -- will bring faster data speeds and greater network density, but it is also is expected to usher in the next leg for the Internet of Things. The technology is expected to underpin car-to-car communications that are thought to turn autonomous cars from thought to reality. Given the unquenchable thirst for data by consumers, which has only grown in recent years as mobile has become the connection of choice at the same time as streaming and other services have captured consumer attention, the deployment of each new mobile technology has been followed by a massive upgrade cycle. We saw this when Apple debuted its first 3G iPhone and then again with the 4G LTE version, which is the current mobile standard across most of the globe. Currently, mobile carriers from AT&T and Verizon to Telecom Italia, which trades over the counter as TIIA, and China Telecom are deploying their next generation 5G networks, each in varying degrees. Some have launched test markets and others are preparing to expand that offering. The issue with these networks is that for widespread adoption to take occur, 5G smartphones and other devices need to be available. We have started to see initial models go from being announced to hitting shelves, including those from Samsung, Nokia and Lenovo's Motorola, but the number of 5G smartphones is widely expected to step up in force later this year and in 2021. In particular, Apple is expected to release up to four redesigned 5G iPhones later this year. Given the pandemic, the logical question to ask is whether these 5G deployments remain on track? Recently, when Taiwan Semiconductor reported a more than 40% year-over-year increase in its March quarter revenue it chalked it up to growing demand associated with 5G, the Internet of Things, communications, automotive, power and image sensor markets that offer a long-term opportunity that spans through 2020 and into 2021. Soon thereafter, AT&T announced it is nearly doubling the number of markets in which it offers its 5G network, adding in 90 new areas to cover more than 120 million people. To me this suggests, the 5G upgrade cycle is poised to begin in the back half of this year and gain momentum in 2021. One of the key mobile semiconductor companies that has also been steadily increasing its quarterly dividend for the most part since 2003 is Qualcomm . Granted there have been a few years during which the company's dividend remained unchanged, but over the past 15-year period it grew its quarterly dividend to 62 cents per share in 2019 from the original 5 cents per share. Recently Qualcomm, which benefits from business model that combines chip sales and a high margin intellectual property licensing business, upped its dividend to 65 cents per share for 2020. The annualized dividend yield associated with that new dividend equates to almost 3.5%. And with the multi-year prospects for 5G ahead of it, odds are high Qualcomm will remain on this dividend-increasing path. Moreover, even though 5G is only about to get underway from a commercial volume perspective, the industry is already laying the groundwork for 6G. (Apple and Verizon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Amid the Crisis, This Tech Stock Should Keep Its Dividend Strong

Here's why Qualcomm -- with its 3.5% annualized yield -- should remain on its dividend-increasing flight path.

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