Mobile phone chip giant Qualcomm, Inc’s. (NASDAQ:QCOM) stock has missed out on the current overall stock market bull run spurred by last November’s election results. But, that could change.

Qualcomm has been bombarded by some major chip licensing disagreements over the past couple of years. It is also pursuing a game-changing purchase of an arch rival based in Europe. Once these are over, QCOM stock could really rally, and its cash flow generating capabilities remain as impressive as ever.

Qualcomm’s Shareholder Return Strategy

Qualcomm has three main strategies to boost its results (and hopefully QCOM stock share price as well). Growing sales is an obvious one. Qualcomm sees strong organic growth continuing in its licensing business, despite a major contract dispute with cellphone industry titan Apple Inc. (NASDAQ:AAPL).

Qualcomm’s current dispute with Apple is proving a real distraction on near-term results. Because of the spat, at the end of April, QCOM lowered its third-quarter guidance rather dramatically. Management expects sales to fall between 7%-21% from the third quarter of last year to a range of $4.8 billion-$5.6 billion. Reported earnings could fall as high as 46% to a range of 52-62 cents.

The market seems to be taking the fallout from the disagreement in stride. QCOM stock is still trading well off its highs during an overall bull market, but hasn’t fallen dramatically along with any news flow related to Apple’s moves. A previous licensing dispute with China (how would you like both Apple and China to be after you?) has, for the most part, been settled and total licensing global sales should rise 7% this year to 1.8 billion devices.

Most importantly, Qualcomm is set to soon acquire NXP Semiconductors NV (NASDAQ:NXPI). It’s somewhat worrisome that the company is diversifying out of mobile phone licensing and chips (perhaps because it sees future growth as challenging), but NXP adds exciting new markets. Automotive, Internet of Things, and networking are new product areas for Qualcomm, and they are expanding rapidly.

Qualcomm Aims to Boost Profitability

A recent cost-cutting program lowers costs by $1.4 billion annually, and cuts related to folding in NXP are also possible. Management said to expect $500 million per year back when it first announced the deal last October. The company’s third goal is “balanced capital deployment,” or finding the best uses for the billions (nearly $7 billion last year) in free cash flow it generates every year.

Qualcomm recently increased its quarterly dividend by 7.5% to an annual payout of $2.28 per share. Roughly $3 billion is spent on dividends every year. At the current share price of $57.29, that works out to a dividend yield of approximately 3.9% — nearly double the market’s current overall yield of closer to 2%.

The remaining free cash flow goes to share repurchases and acquisitions, such as the pending NXP deal. The deal is far from cheap — Qualcomm is paying $47 billion in cash. That works out to $110 per NXP share, which is right where the stock is currently trading and indicates the market expects the deal to go through.

Qualcomm currently has close to $20 billion in cash in the bank, though $10 billion in existing long-term debt. The company may have to slow share repurchases, but the dividend will likely be maintained. NXP is also no slouch when it comes to generating free cash flow (close to $2 billion last year), and has $2 billion in cash on its balance sheet. Though, NXP also has $9 billion in debt.

Bottom Line for QCOM Stock

Qualcomm is a cash generating machine. Its cumulative return to shareholders (since it was founded) is $55 billion (dividends and stock buybacks). As long as the NXP deal goes through, that should continue, but growth should also improve. Combining the two companies will boost annual sales to $30 billion, which is huge, but still only about half the level of industry titan Intel Corporation (NASDAQ:INTC).

Qualcomm’s stock valuation is reasonable, and the despite the licensing disagreements, its patents look likely to dominate the mobile phone chip realm indefinitely. That market is also growing nicely globally.

The uncertainty and slow growth is a bit disconcerting, though. Apple is being extremely difficult on the licensing front, as is the Chinese marketplace. The NXP deal is also being closely examined by European regulators. But, combined, the uncertainty is a key reason QCOM stock is very reasonably valued at 13x forward earnings.

I am seriously considering QCOM stock, and am a likely buyer on any share price or stock market weakness.

As of this writing, Ryan Fuhrmann owned shares of Intel.