I've previously written about several dividend stocks that have traditionally paid consistent and growing dividends. Stocks typically begin to pay more dividends as their industries mature and the need for capital investment declines or the company has built a sufficient cash base to support both at appropriate levels. The ability to classify a payment to shareholders as a dividend is based upon the amount of retained earnings. In the other cases, it might be classified as a return of capital.
Intel Corp. (NASDAQ: INTC) is a member of Dow Jones Industrial Average. Its addition signaled the increasing importance of technology in the U.S. economy. The other recently added technology companies include Microsoft Corp. (NASDAQ: MSFT) and Cisco Systems, Inc. (NASDAQ: CSCO).
INTC is a leading global semiconductor manufacturer with 2010 revenue of $43.6 billion and a market capitalization of $122.6 billion. INTC creates technology products, including integrated circuits, motherboards, and chipsets, for the computing and communications industries. INTC also designs and manufactures wireless and wired connectivity products. The company was founded in 1968 and is headquartered in Santa Clara, CA. The following graph shows INTC's historical dividend yield using traling twelve months of quarterly dividends:
Created from data from Yahoo Finance. INTC has a very consistent history of quartery dividends that have increased steadily
INTC's most recent quarterly dividend was $0.181 with an ex-dividend date of May 4, 2011. The above graph indicates that INTC began paying substantial dividends around 2005 to 2006 when it crossed the 2% dividend yield level. During the collapse in 2008, INTC's yield reached 4%. The following table shows INTC recent quarterly dividends with the first four entries being my estimate for the upcoming 4 quarters.
INTC Historic and Projected Dividends Source: Yahoo Finance, **INTC press releases, *author estimates
Ex-dividend date Amount Y/Y % increase May* 0.230 26.9% February* 0.210 15.9% November* 0.210 33.3% August** 0.210 33.3% 5/4/2011 0.181 15.0% 2/3/2011 0.181 15.0% 11/3/2010 0.158 12.5% 8/4/2010 0.158 12.5% 5/5/2010 0.158 12.5% 2/3/2010 0.158 12.5% 11/4/2009 0.140 0.0% 8/5/2009 0.140 0.0% 5/5/2009 0.140 0.0% 2/4/2009 0.140 9.4% 11/5/2008 0.140 23.9% 8/5/2008 0.140 23.9% 5/5/2008 0.140 23.9% 2/5/2008 0.128 13.3%
Using this table it is possible to look at different ways that dividend yields are calculated with the assumption that the stock price is $23.13. My own estimate would be to assume that there could be another increase within the next four quarters to the one already announced - only time will tell on this.
|Method||Dividend Value||Dividend Yield||Used by|
|Trailing Twelve Months||0.68||2.9%||Edgar online data|
|Annualized most recent paid||0.72||3.1%||Yahoo Finance, Zacks.com|
|Forward estimated (next four quarters)||0.86||3.7%||Author|
|Annualized next declared||0.84||3.6%||Dividend.com, CNBC|
Source: Web sites listed.
So, it is important to see what the actual dividend history is to determine what makes sense. This case also simplifies the matter since INTC typically pays a dividend that is similar to the previous dividends, or a set increase. Many foreign companies payout a portion of some financial measure resulting in much more variable which will spread the results even further apart. Dividend.com also sometimes uses the most recent result if a new dividend has not been declared yet.
Under the INTC quote there was no information to support the $0.84 annualized dividend from the listed quarterly dividends creating some confusion which was cleared up by the INTC press release. The following graph puts it all together for INTC with a focus on the last five years:
Created from data from Yahoo Finance.
The above graphs shows an interesting result. Dividends (trailing twelve months) have more than doubled since October 2005; however,the stock price has essentially remained the same. This has resulted in a doubling of the yield, with an even greater peak during the market meltdown. This next graph zooms out over an even larger time frame:
Created from data from Yahoo Finance.
It clearly shows an even more dramatic performance in dividends, while it should be noted that it was starting from a very low base when INTC was viewed as a growth stock. However, the overall returns for the past 10 years have not been very compelling and it appears that they are largely flat. However, looking forward, as a dividend stock, INTC offers some pretty good promise especially, given its ability to increase dividend payments.
The second part will focus on valuing INTC as a dividend stock using the Dividend Discount Model.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. INTC was actually the first stock that I ever purchased back in October of 1997. I bought 5 shares for approximately $400.