Intel's (INTC) 1Q 2012 revenue was $12.9B. This is up 45% from the 1Q 2007 Revenue of $8.9B. Over the same time frame Non-GAAP adjusted Earnings have gone from $0.27/share to $0.56/share and the quarterly dividend has gone from $0.1125/share to $.21/share. Last week Intel announced the dividend would rise further to $0.225 starting in the 3rd quarter.
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Intel's dividend yield of 3.3% puts it in the middle of the pack among the high yielding semiconductor companies. Based on Friday's May 11th closing prices Microchip Technology (MCHP) is first with a dividend yield of 4.4%. Maxim Semiconductor (MXIM) and Linear Technology (LLTC) have a dividend yield of 3.3%, and Analog Devices (ADI) has a dividend yield of 3.2%.
What does stand out about Intel is the dividend to Non-GAAP Earnings Ratio of 40% when compared to the other 4 high yielding Semiconductors.
With Intel's strong balance sheet, X86 Near Monopoly, and Best in Breed Semiconductor Engineering and Wafer Fabrication Facilities their can be little doubt about Intel's ability and willingness to pay the dividend. Note: In the 2008-2009 downturn many US companies slashed dividends but Intel along with the other 4 high yielding semiconductors I mentioned did not. Perhaps you don't get the leverage of a JPMorgan (JPM) "London Whale" buying and selling exotic derivatives, but you do get peace of mind about the dividend.
In addition, Intel is beginning to move into smartphone chips. This is a good direction for the company, but it will take several years for this to pan out going up against ARM smartphone semiconductor vendors such as Qualcomm (QCOM), and Broadcom (BRCM).
If you're looking for a safe income stock with potential for growing dividends, you cannot go wrong with Intel. The only caveat I have is when to buy. The semiconductor stocks typically lag in the summer and pop up in the fall. See the graph below:
In conclusion, I suspect we will get a chance to buy Intel in a momentary dip with a yield above 3.5% or a stock price of $25.50. Intel's definitely on my watch list.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in INTC over the next 72 hours.
