Analog Devices Has More Dividend Headroom Than Texas Instruments

Texas Instruments pays the larger quarterly dividend, but Analog Devices currently leaves more room between its cash generation and its payout. The stronger income profile therefore depends on what an investor values: more cash today from Texas Instruments, or a wider operating cushion at Analog Devices.

Texas Instruments raised its quarterly dividend to $1.52 a share from $1.42. Analog Devices pays $1.10. Those dollar amounts alone are not comparable because the shares trade at different prices, so the more useful test is how much free cash flow each company commits to dividends.

Texas Instruments reported $8.422 billion of free cash flow for the 12 months ended September 30, 2026, and $5.174 billion of dividends paid. That is a 61.4% payout ratio based on the company's reported non-GAAP free cash flow, according to a BTI calculation. The measure includes $1.104 billion of direct CHIPS Act incentive proceeds. Excluding only those proceeds would lift the ratio to 70.7%.

The comparison becomes more conservative if all CHIPS-related cash benefits are removed. Texas Instruments disclosed $1.573 billion of total CHIPS cash benefits over the same period, including a $469 million tax benefit already reflected in operating cash flow. Removing both components would leave about $6.849 billion of adjusted free cash flow and put dividends at 75.6% of that amount. This is a sensitivity test, not a company-reported metric, because the tax credit and direct incentive proceeds enter the cash-flow statement differently.

Analog Devices reported $4.937 billion of trailing free cash flow for the 12 months ended August 1 and $2.043 billion of dividends paid. Its corresponding payout ratio was 41.4%. The company also spent $3.127 billion on share repurchases during that period. Buybacks are discretionary, which gives management a large cash-return program it could reduce before considering a dividend cut.

The cushion is not free of risk. Analog Devices completed its $1.5 billion acquisition of Empower Semiconductor in July, and its filing showed that purchase accounting remained preliminary. The company also has meaningful exposure to data-center spending: management said data centers represented 80% of its communications segment, not 80% of total revenue. A slowdown in artificial intelligence infrastructure spending could pressure that part of the business.

Texas Instruments faces a different tradeoff. Its trailing free cash flow rose sharply as capital spending fell to $2.578 billion, while revenue increased 28% from a year earlier in the September quarter. The company is still building out 300-millimeter manufacturing capacity, so a renewed increase in capital expenditures would reduce the cash available after dividends. Its 23-year record of annual dividend increases is valuable evidence of commitment, but it does not eliminate that funding risk.

Analog Devices therefore has the stronger dividend buffer today, while Texas Instruments offers the higher current payout and the longer record of increases. The decisive question for Texas Instruments is whether factory investment rises again faster than operating cash flow. For Analog Devices, it is whether acquisition debt, buybacks and data-center exposure remain manageable without narrowing the dividend cushion.