This week’s Stock of the Week is a technology company that makes chips for products that are all around you.
Analog to Digital
Microchip Technology Inc. (MCHP) is a major semiconductor manufacturer that consumers interact with constantly—but few know it. This is because the company is not deeply involved in consumer-focused communications or computers—its specialty is chipsets that change analog signals to digital ones and vice versa.
Operations using Microchip’s microcontrollers range from car temperature settings to controls for toasters and garage-door openers. Lighting, power supplies, security and human-machine interface are among the applications of its products, which are widespread in the automobile, aerospace, defense, security, medical and industrial fields.
The company is highly efficient, strongly committed to research and development, and determined to return profits to shareholders through dividends, which have increased for 37 quarters in a row. The current dividend is $1.46/share/yr., recently yielding 1.7%. The firm recently bought Microsemi Corporation, the largest US commercial supplier of military and aerospace semiconductor equipment, for $10 billion—and will have an immediate earnings boost as a result. Microchip’s revenue was $3.98 billion in fiscal 2018 and likely will be $5.9 billion in fiscal 2019 and $6.6 billion in fiscal 2020.
Fiscal year: March. Earnings per share: 2020 est./$7.56…2019 est./$6.56…2018/$5.45.
Tom Plumb is president and chief investment officer, Plumb Funds, Madison, Wisconsin, including the $86 million Plumb Balanced Fund (PLBBX) and $38 million Plumb Equity Fund (PLBEX).