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At first glance, the casual reader would think Altria (NYSE:MO) and Intel (NASDAQ:INTC) have nothing in common. But these two companies are similar in three major categories, namely revenue consistency, dividends, and share buybacks. This article will examine the above-mentioned criteria to determine which of the two companies will be a better investment going forward.

Year

2008

2009

2010

2011

2012

Revenue in millions

19356

23556

24363

23800

24000

Dividends per share

1.68

1.3

1.42

1.55

1.67

Shares outstanding

2064

2076

2088

2044

1900

The table shows results for MO. 2008 was used due to the spin-off of Philip Morris International (NYSE:PM).

As we can see from the table above, MO has been a consistent performer since the spin-off of its international franchise. The above numbers are skewed somewhat due to the split-off. However, shareholders have been handsomely rewarded with the performance of the separate entity. The dividend since 2009 has grown 28% to yield roughly north of 5% at current levels. Management has further enhanced its shareholder-friendly reputation by shrinking shares outstanding by roughly 8% in that time frame. The numbers are quite favorable. Now I will compare them to INTC using the same time frame.

Year

2008

2009

2010

2011

2012

Revenue in millions

37586

35127

43623

53999

53400

Dividends per share

.55

.56

.63

.78

.87

Shares outstanding

5562

5523

5511

5581

5000

INTC has also put in a very respectable performance in the same time frame. The dividend has grown an outstanding 58%, from 55 cents to 87 cents per share. Shares outstanding have shrunk slightly more than 11% in the same time frame, further enhancing shareholder returns. The current dividend rate of 22.5 cents per share equates to a yield of roughly 4.2%. While the current yield is less than MO, INTC has ample room for future hikes due to a much lower payout ratio.

In my opinion, the key to robust future dividend growth is the ability to grow revenue at a brisk pace. INTC will outperform MO in this metric going forward. INTC is currently plagued by slowing PC sales combined with a lack of a compelling offer in mobile devices. These headwinds should improve soon with further product innovation.

MO is desperately fighting to maintain its dominant share in the ever-shrinking domestic tobacco market. With the spin-off of its international tobacco operations, MO's best opportunity for future growth was jettisoned. The biggest threat facing the tobacco industry going forward is increased regulations. The latest threat is for tobacco products to be concealed and not readily seen. Also, the adult rate of smoking has dropped quite a bit while the youth rate has stayed steady. A 1% drop in youth smoking rates will have a devastating impact on long-term tobacco profits.

In summary, INTC offers a more compelling risk/reward proposition for the income-seeking investor. With its dependence on the domestic tobacco market, MO offers little opportunity for future revenue growth. Outside of acquisitions to diversify its revenue stream, I expect dividend growth for MO to fail to keep pace with what INTC can provide.

Disclaimer: The article is for informational purposes only and not actual investment advice.

Source: Comparing Altria To Intel: Which Will Provide Superior Dividend Growth Going Forward?