Stock Analysis

Intel (NASDAQ:INTC) Is Increasing Its Dividend To US$0.36

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NasdaqGS:INTC
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Intel Corporation's (NASDAQ:INTC) dividend will be increasing to US$0.36 on 1st of June. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

View our latest analysis for Intel

Intel's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Intel's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 36.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 39%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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NasdaqGS:INTC Historic Dividend May 2nd 2022

Intel Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the first annual payment was US$0.84, compared to the most recent full-year payment of US$1.46. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Intel has seen EPS rising for the last five years, at 20% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Intel Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Intel (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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