Like most semiconductor stocks, Qualcomm (NASDAQ:QCOM) stock has had a wild ride in 2019. The stock plummeted over 30% early in the year. However in the last month, QCOM stock has recovered. And in the last ten  days, the stock has closed at, and is settling near, its 52-week high.

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Most of QCOM stock’s recent surge has been due to the company’sstrong earnings. On Nov. 6, QCOM reported earnings per share  of 78 cents. That was above analysts’ average EPS estimate of 71 cents. The company also beat on revenue, bringing in $4.80 billion, versus analysts’ average estimate of $4.71 billion.

Although the current growth of Qualcomm has some analysts seeing a rosy future, Qualcomm has a history of giving growth investors a bumpy ride. But one constant of QCOM stock has been its dividend.

QCOM Has Maintained a Consistent Dividend

Qualcomm has held its dividend steady at 62 cents for the last seven quarters. The company’s dividend yield sits at 2.74%. That reflects the recent surge of Qualcomm stock. As the company’s stock price has increased, the dividend yield of QCOM stock has gone down. However, as the chart below shows, the company’s dividend still remains competitive versus its peers.

And Qualcomm currently pays out over 87 cents per share of its earnings as a dividend.

However, the dividend  has the attention of some analysts, due to the ongoing legal battles that are casting a cloud over Qualcomm’s future earnings.

QCOM Is Really Two Companies

As some of you may know, Qualcomm is one company that has two distinct business segments. The more well-known segment is its chip segment, Qualcomm CDMA Technologies (QCT). But it also has a licensing business, Qualcomm Technology Licensing (QTL). The latter business has been disruptive for QCOM and Qualcomm stock.

The QTL business has accounted for approximately 80% of  Qualcomm’s profits and cash flow. Since QTL primarily focuses on collecting royalties, it’s not surprising that it would provide juicy margins of about 85%.

But in the past few years, Qualcomm has been embroiled in legal battles due to accusations by its customers of violating antitrust laws. QCOM has long had a “no license, no chips” policy, even though  smartphones cannot access  worldwide networks without its chips.

However, this policy put the company in the cross-hairs of the Federal Trade Commission. The FTC initiated a lawsuit alleging that Qualcomm was a monopoly.

A federal court ruled in the FTC’s favor. This decision, if upheld, will force Qualcomm to change its licensing practices to conform  with industry norms and  fair, reasonable, and non-discriminatory (or FRAND) practices.

The court’s decision could devastate Qualcomm’s QTL business. And since, as previously noted, QTL is responsible for 80% of the company’s profits,  such a move would certainly have an adverse affect on the company’s dividend.

The FTC’s Decision Is Being Appealed

Qualcomm was successful at getting a stay of the ruling, pending an appeal. Given the high-profile nature of this case, it is likely that the court will fast-track the case. That means a decision could be handed down sometime in 2020.

But will Qualcomm be successful? It would seem that Qualcomm faces an uphill battle. Ankur Kapoor, an antitrust partner at Constantine Cannon, says for Qualcomm to be successful, it will have to successfully undermine the legal basis for the ruling.

“The only chance for Qualcomm to overturn this on appeal is on a pure question of law, a pure legal issue,” said Kappor. “The big one is whether or not violation of FRAND obligations can constitute an antitrust violation or if it’s just a breach of contract.”

What’s Next for Qualcomm Stock?

While the antitrust case plays out, Qualcomm’s business model and its dividend look safe for the next few quarters. And, for now, analysts seem to be bullish on QCOM stock. Their  average price target on Qualcomm is $87.27 with a range of $60-$115. Their average rating on QCOM stock is “buy.”

As of this writing, Chris Markoch did not have a position in any of the aforementioned securities.