A few days ago Intel (INTC) increased its dividend 7.14% from $.21 to $.225 per quarter. This is the 9th straight year of increases. I was anticipating a larger boost in 2012, but 7.14 % is still welcome. There is a chance INTC will do another dividend increase before the year is up, but I'm not going to count on it or make any predictions.
My initial INTC purchase came with a 3.75% yield the day I bought it. After 2 increases it has already ballooned to a 4.67% yield on cost. This is what dividend growth investing and compounding is all about. The payout ratio is still healthy at 38.1%, there is plenty of room to take the company to dividend contender status and beyond. I'm not one to get excited about tech stocks, but if Intel can get a foothold in the mobile market the stock price is going to soar.
PC and smartphones are something that going to be two different things for some time so Intel will have its share in PC industry. Yes Intel ratios are one of the best from largest companies. Im placing its No.2 after Chevron. What I dont like is their equity level decrease and very large share repurchase over 100% of earned cash flow (net income + depreciation), this it very unhealthy for the company in long term. Company must invest and grow and when their equity is decreasing that not going to happen as debts are not bottomless and all creditors (financial and suppliers) always look at how many money company has of its own. Good news is that dividends + share repurchase was below 100% in last few quarters, but im considering ~50% as a good level for a company as other half should be invested into growth and expansion.
ReplyDeleteIntel does spend a lot of cash on capital expenditures, around $10 billion per year. It's why they make the best chips. I don't mind if a company chooses to do stock buybacks, but I'm not a fan of borrowing to do it. Right now interest rates are historically low, which might explain the strategy.
ReplyDeleteThe good news is that when INTC did massive buybacks the stock price was a lot lower than today. So far it appears to be working.
Lest hope it woun't reach IBM level. As everything in live everything must be balanced and IBM under my opinion has crossed that line with their share repurchase. I bet that their share price would fall 2-3 times if they stop their share repurchase program.
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