How Qualcomm, Inc. (NASDAQ:QCOM) Intends To Finance Sweetened Buyback And Dividend Plan

Qualcomm, Inc. (NASDAQ:QCOM) announced a plan to repurchase $10 billion of its stock within a period of 12 months. The company also bumped up dividend payout. According to the management, the steps mean the start of major capital returns increases. However, Qualcomm will use debt to finance the capital returns.

Expert breakdown of the QCOM candlestick chart.

Qualcomm, Inc. (NASDAQ:QCOM) announced $10 billion stock repurchase authorization. The move will see the company make an overall stock buyback of as much as $15 billion as it replaces an existing program, which has ha about $2.1 billion remaining. Shares of Qualcomm have declined more than 6% so far this year.

14% increase in quarterly dividend

In another major capital return move, Qualcomm announced 14% increase in dividend. As such, the company will reward shareholders with $0.48 a share from $0.42 in quarterly dividend.

The step to increase capital returns to shareholders comes at a time when the company has revealed that it was generating significant operating cash flow and intends return extra cash to shareholders. However, the company still expects to maintain a flexible financial position even as it moves to put more money in the pockets of its investors.

Raising debt

To finance the improved capital returns, Qualcomm, Inc. (NASDAQ:QCOM) intends to raise debt. The company will be raising debt despite having a huge cash stockpile in offshore accounts. Qualcomm reportedly boosted its offshore cash hoard by nearly $4 billion in the past year. Raising debt is a cheaper way for the company to raise funds given the low interest rates and the appetite for bonds in the market.

Qualcomm is among the U.S. companies, especially in the tech industry, which are avoiding repatriating their offshore profits because of the steep taxes at home. Apple Inc. (NASDAQ:AAPL) is another company with massive cash-hoard overseas but recently raised debt to fund operations because of the prohibitive U.S. corporate taxes.

Exposure to Apple

Qualcomm, Inc. (NASDAQ:QCOM) makes money through the sale chips and licensing of technology. The company made significant gains in the December quarter thanks to its exposure to Apple, which obtained its iPhone chips from it. Apple attained record profits of $18 billion in the quarter.

John Eisler

John Eisler

John is a special projects and general assignment reporter, noted for breaking several exclusive stories.