In this series of articles, I will be identifying which stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. Parts 1 and 2 can be found here and here.
For Part 8, I will be taking a look at Semiconductor stocks. These stocks include:
- Altera (NASDAQ:ALTR)
- Analog Devices (NASDAQ:ADI)
- Broadcom (BRCM)
- Intel (NASDAQ:INTC)
- Linear Technology (NASDAQ:LLTC)
- LSI (NYSE:LSI)
- Microchip Technology (NASDAQ:MCHP)
- Micron Technology (NASDAQ:MU)
- Nvidia (NASDAQ:NVDA)
- Qualcomm (NASDAQ:QCOM)
- Texas Instruments (NASDAQ:TXN)
- Xilinx (NASDAQ:XLNX)
The following stocks do not currently pay dividends: LSI and Micron Technology.
When ranking the dividend-paying stocks by yield, the order is as follows:
- Intel - 3.41%
- Microchip Technology - 3.06%
- Analog Devices - 2.90%
- Texas Instruments - 2.64%
- Xilinx - 2.53%
- Linear Technology 2.41%
- Qualcomm - 2.09%
- Nvidia - 1.87%
- Altera - 1.85%
- Broadcom - 1.62%
When ranking them by dividend growth over the past five years, the order is as follows:
- Altera - 200.00%
- Texas Instruments - 172.70%
- Qualcomm - 147.10%
- Xilinx - 107.10%
- Analog Devices - 85.00%
- Intel - 60.71%
- Broadcom - 50.00%
- Linear Technology - 22.73%
- Nvidia - 13.33% (started paying dividends on 11/20/12)
- Microchip Technology - 4.87%
Based on yield/growth combinations, I believe that Intel, Analog Devices, Texas Instruments, Xilinx, and Altera. Altera has a dividend yield under 2% but it has seen the highest growth over the past five years. And while Microchip Technology has a yield over 3%, its growth has been almost non-existent (less than 1% average annual growth over the last five years).
Looking at the chart below, you can see that Intel and Altera have had the best revenue growth over the past five years, while Analog Devices and Texas Instruments has seen the lowest.
When looking at earnings, Intel has significantly had the best growth over the past five years. Texas Instruments comes in second, while Altera and Xilinx has seen the lowest growth in earnings.
Based on trailing PE ratio, Intel is the most attractively priced stock out of the group, while Altera has the highest PE ratio.
Looking at forward PE ratio, Intel remains the most attractively priced, while Analog Devices appears as the most expensively priced stock.
Each of the stocks have fair to low payout ratios, with Analog Devices having the highest at 60.63% and Altera having the lowest at 40.32%.
Based on the fact that Intel has 1) the highest dividend yield, 2) is in the middle of the pack in terms of dividend growth, 3) has seen the highest revenue and earnings growth, 4) and is the most attractively priced stock out of this group, I feel that Intel is the stock to own out of this group of stocks for long term income investors.
The success of technology stocks is largely dependent on a company's ability to change and adapt over long periods of time. Intel has been able to enhance and improve its products and markets over time and I believe this will continue. Through innovation and further acquisitions, I believe that Intel will be a great buy for long term investors, especially at its current price.
As always, I suggest individual investors perform their own research before making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.