Texas Instruments vs UnitedHealth Group, Which Is Best?

Among dividend-paying stocks, the choice seems broad at first glance but high yields are often a hint that balance sheet problems exist. So when you narrow down the group of stocks that can pay a reasonable yield and have wide moats and A+ business models, the pickings are much slimmer.

Two of the top contenders for income-seekers are Texas Instruments and UnitedHealth Group, but which is the better choice?

Old-School Semiconductor Giant Texas Instruments 

Not all semiconductor stocks are shiny like that of AI-related names like NVIDIA Corporation (NASDAQ:NVDA). Some, like the company in question, focus on powering devices, without which the age of AI itself would be in jeopardy.

Texas Instruments is a chip company that focuses largely on analog and embedded products and has a massive suite of SKUs stretching to 80,000+ products.

What’s even more impressive is the fact that the company has its own fab, and is growing. Late in 2024, the U.S. Department of Commerce announced an award of up to $1.6 billion in direct funding through the CHIPS and Science Act. This award supports investments through 2029.

The funding will essentially help in the advancement of the company’s three new 300mm wafer fabs, which are currently under construction in Texas and Utah. Texas Instruments is also set to receive a tax credit of an estimated $6 billion to $8 billion.

The company is committed to a capital allocation strategy. Texas Instruments has a long-standing dividend-paying and dividend-growing history. As of the 2024 year-end, the company enacted a 5% increase in its quarterly dividend, the 21st consecutive year of dividend increases. Since 2004, TXN’s dividend has grown at a really remarkable CAGR of 23%.

The Board of Directors last declared a quarterly dividend of $1.36 per share, amounting to an annual dividend of $5.44 per share and yielding 3.01%, higher than its own four-year average.

Of course, the health of a company’s dividend depends on how it is performing financially and Texas Instruments has last reported its fourth quarter results that unfortunately revealed weakness on the financial front at the moment.

Revenues for the fourth quarter fell by 2% from the prior year’s period to $4.01 billion, while earnings per share dipped by 13% year-over-year to $1.30.

With that said, Texas Instrument’s dividend doesn’t seem to be in any imminent danger of giving up its quarterly payout thanks to $1.50 billion in free cash flow, on a trailing-12-month basis, an 11% jump from the year-ago value.

Needless to say, the market did not take the news of this result kindly. Over the past month, Texas Instrument’s stock has shed more than 5%. So, at this point, it looks like the lack of shine when compared to some of its brighter peers is hurting it. Also, its reliance on the auto market has created a downturn.

Health Insurance Juggernaut UnitedHealth Group 

It doesn’t need to be reiterated just how important health insurance is in modern American society. The health insurance sector is increasingly in focus these days and not always for the right reasons. Whether it’s government legislation or attacks on executives, UnitedHealth falls squarely in the middle of the turmoil as one of the largest insurers.

There has been a lot of volatility of late for UNH shareholders. First of all, the event that shook the nation last year was the fatal shooting of one of the company’s unit CEOs, Brian Thompson. As the case gained coverage, the dissatisfaction of the general American public with the U.S. healthcare system came to light.

Americans are now paying more than ever for health insurance, even though insurers are rejecting more than 1 in 5 claims. Since the unfortunate incident, there has been an outpouring of people sharing their less-than-favorable experiences with the health insurance system.

UnitedHealth’s overall CEO, Andrew Witty, has also admitted that the system is not perfect and that the company would be willing to partner with anyone to make it work better.

While this was a sector-specific issue rather than company-specific, UnitedHealth was also targeted by a data breach. The company reported that the targeted attack last February resulted in hackers stealing the records of 190 million people. This was said to have impacted 1 in 2 Americans. Over the past six months, the company’s stock has declined by more than 7%.

Now, it becomes important to look through the commotion and see how UnitedHealth is actually performing. UnitedHealth has last reported Q4 results for fiscal 2024 and they were a mixed bag.

Revenues came in at $100.81 billion, growing by 7% from the prior year’s period but this was marginally lower than what analysts were expecting. To the company’s credit, its Optum segment has been holding out strong.

UnitedHealth was also efficient in posting profitability gains. Adjusted earnings per share came in at $6.81, which was better than the $6.16 year-ago figure and also eclipsed analysts forecasts.

On the payout front, UnitedHealth started paying dividends in 1990 and moved to a quarterly basis in 2010. It last paid a quarterly dividend of $2.10 per share, amounting to $8.40 per share in annual dividend and yields 1.53% on prevailing prices.

Texas Instruments vs UnitedHealth Stock

Texas Instruments has upside to $204 per share, an 11.1% upside opportunity versus UnitedHealth which has 21.6% upside to fair value of $637 per share, making it the more attractive investment now from a reward to risk perspective.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.