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Market Cap: $2.06 Billion
Share Price: $13.54
Cypress Semiconductor is worthy of investors' attention, because, as RBC Capital's Freedman, notes, not all dividends are created equal. "Cypress Semi has no U.S. profits, so its dividend is classified as a return of capital, which should receive more favorable tax treatment than a distribution of profit," he told
Thanks to its cost structure, the semiconductor specialist makes an operating loss in the United States. This means that, unlike many companies, its quarterly payments are not treated as "qualified dividends," which would be subject to a dividend tax rate of up to 15%.
Cypress says that a final decision on the tax treatment of its recent quarterly dividends will be made after the company's 2012 fiscal year-end.
Even without the tax benefits, though, Cypress Semiconductor's payment still compares favorably to other tech sector dividends. The San Jose, Calif.-based firm paid its first dividend of 9 cents a share in July 2011, increasing its quarterly payment to 11 cents in March this year. The dividend
yields an impressive 3.25% at the company's current share price.
Xilinx(XLNX) has a yield of 2.7%, while
Integrated Device Technology(IDTI), another competitor, does not pay a dividend.
In addition to its dividend, Cypress Semiconductor has also been generous with share buybacks, authorizing a $400 million repurchase program in September 2011, which followed a $600 million buyback authorization a year earlier.
Cypress Semiconductor's valuation should also appeal to investors. The company's stock recently hit
a 52-week low, and is down almost 20% since the start of this year.
expectations have weighed heavily on the company's stock, although this could work in investors' favor, as Cypress looks to rebound in the second half of the year.
"We believe [the company] provides attractive risk-reward at current levels," noted Sterne Agee analyst Vijay Rakesh recently, citing its strengths in the touchscreen tablet and smartphone markets. "Cypress Semiconductor has also been aggressively returning shareholder value with a more than 3% dividend and a more than 20% buyback over the last four quarters," he added.
Written by James Rogers in New York.Follow @jamesjrogers
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