Advanced Semiconductor Engineering (ASX) builds and distributes integrated circuits and other electronics. It’s not as sexy as some mobile chipmakers, but thankfully it’s not as exposed to post-PC pressures as other stocks, such as Intel (INTC).
Advanced Semiconductor focuses mainly on chips for cellphones, household appliances, automobile components, personal computers and HD televisions, among other products. The company is based in Taiwan, close to many Asian electronics manufacturers.
Year-to-date, ASX has been under pressure like many PC-related enterprises and shares are flat while the S&P 500 is up nicely. However, the diverse business of Advanced Semiconductor makes it a bit more stable in the long haul than a company very reliant on laptops and desktops.
Furthermore, ASX is not a chip designer and simply a foundry — meaning unlike ARM Holdings (ARMH) or Intel, it doesn’t have to fund costly research departments to keep up with the latest specs. It simply makes the semiconductors to order.
There might not be breakneck growth here without a secular recovery in consumer spending, but brighter days seem to be ahead in 2014 — and that could boost ASX as electronics sales pick up in the next year or so. Furthermore, the reliable revenue from the ASX foundry biz does generate a one-time annual dividend that adds up to about 1.6% a year based on 2012’s payday.
That dividend was in August, by the way, so ASX is overdue to declare another payout. The company is operating soundly in the black and forecast to earn 34 cents a share this year — meaning even just a 25% payout ratio would net investors a 2% yield based on current valuations in the low $4 range.