Intel Dividend Raise Gives Even More Value

| About: Intel Corporation (INTC)

Monday morning, chip giant Intel (NASDAQ:INTC) announced that it was raising its quarterly dividend. Intel will increase the dividend payout per quarter from 21 cents to 22.5 cents starting with the dividend to be paid in the third quarter of this year. With the new dividend, Intel will be paying out $0.90 per year to shareholders.

This is the third dividend increase from the company in the past 18 months. Recently, Intel was named the top dividend stock of the NASDAQ 100. I called Intel my top value pick for 2012, and Monday's news only reinforces my position.

Intel's dividend has increased nicely in recent years, as you can see from the following table. Now, you will notice that the yield has come down a bit in 2012, but that is only because the stock has run up so much. Also, I have already factored in the next 2 payments, the increased ones, into the dividends paid for 2012 number. Before the increase, Intel was yielding about 3%, comparable to the 2010 average. It is back up to the average of 2009.

If you were to annualize the current yield (based on $0.90 per year), the current yield is 3.24%. Remember, for the table below, I'm using projected 2012 dividends divided by the average closing price of the stock so far this year (as of last Friday's close).

Intel Payout 2008 2009 2010 2011 2012*
Dividends Paid $0.55 $0.56 $0.63 $0.78 $0.87
Average Price $19.96 $17.10 $20.77 $22.05 $26.88
Average Yield 2.74% 3.27% 3.03% 3.55% 3.24%
Click to enlarge

*Projected Dividends and Average closing price year to date.

Intel has been a technology sector dividend leader for some time, and that will continue with the news we received yesterday. Just look at the following table, which shows Intel's dividends against some other big tech names. For purposes of this argument, I am including the Apple (NASDAQ:AAPL) dividend, which Apple will start paying next quarter. Microsoft (NASDAQ:MSFT) has also had a nice dividend, and it should increase again at some point this year, but it will still not be on par with Intel's. Cisco (NASDAQ:CSCO) started paying a dividend in 2011 and announced its first increase this year. Google (NASDAQ:GOOG) does not currently pay a dividend.

Annual Payout $0.90 $0.80 $0.32 $10.60 $0.00
Current Price $27.76 $30.65 $19.08 $569.48 $607.55
Current Yield 3.24% 2.61% 1.68% 1.86% 0.00%
Click to enlarge

Another reason why Intel remains a great value is its current stock buyback plan. From reading Intel's recently released 10-Q statement, Intel bought back nearly 57 million shares in the first quarter for a total price of about $1.5 billion. The company also has $8.6 billion left on the current buyback plan, which at the current rate, would run out sometime this year or next. There is the potential that they will announce a new buyback plan, or an extension of the current one, within the next twelve months.

As a point of reference, Microsoft and Cisco are also buying back large amounts of stock, as you can see from the following table.

Shares (Mil) 56.9 31.0 9.0
Dollars ($B) $1.5 $1.0 $0.145
Market Cap ($B) $138.77 $257.49 $102.76
Amount Left ($B) $8.6 $9.2 $8.2
Click to enlarge

*Cisco amounts are from 7/30/11 to 1/28/12, a 6 month period. Cisco operates on a different fiscal calendar, and is scheduled to report quarterly earnings this week.

As you can see from the table, Intel is currently buying back the most stock, and is buying back the highest percentage (dollars/market cap) of these three. In comparison to the names I mentioned above, Google is not currently buying back stock. Apple is not currently buying back stock, but has announced a plan to repurchase enough shares to cover executive option dilution. The Apple repurchase plan will start later this year.

In summary, Intel's dividend announcement on Monday further exemplifies why it is the best value name in the technology sector right now. It has the highest dividend yield and is buying back the most stock. Dividend raises have been plentiful in recent years, making this name a value lover's dream.

Disclosure: I am long AAPL.