Intel (INTC): Volatile Earnings, Safe Dividends

Over the last five years Intel's (INTC) earnings have fluctuated more than 50%. From a high in 2005, they are now down by almost half. The dividend, however, has been increasing and is very secure. Here's why.

If you’re looking at this page using a PC or Macbook, chances are you’re using an Intel (INTC) processor to do it. Intel (INTC), in fact, has a market share of around 70% to 80% in all segments in which it operates.
At current market prices, Intel (INTC) is providing a dividend yield of 2.68%. For 2009, that represented an annual dividend of $0.63, which was paid quarterly.
Investing in stocks that pay high dividends is an effective way for the conservative investor whose concern is mainly with the preservation of capital. When investing for a high dividend yield, the most important consideration for the investor is the sustainability of such dividends. Hence research into the underlying dividend payer is crucial.
Intel (INTC) is a semiconductor chip maker, developing advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. The Company designs and manufactures computing and communications components, such as microprocessors, chipsets, motherboards, and wireless and wired connectivity products, as well as platforms that incorporate these components. Founded by semiconductor pioneers Robert Noyce and Gordon Moore, the company is also well known for the executive leadership and vision of Andrew Grove.
The company was founded in 1968 and has been paying regular dividends since 1992. The most recent quarterly dividend, declared in March this year, is 4940% higher than the first quarterly dividend declared in 1992. Over the past five years, Intel’s (INTC) dividend has increased at a 15% compound annual rate. The continued increase in the dividend is particularly interesting given the fact that Intel earned 49% less in 2009 than it did in 2005, as measured by net income.
Earnings per share figures have shown a similar type of volatility, as 2009 normalized earnings per share were down 29% as compared to 2008. The average over the last five years is $1.132 per share, and both 2009 and 2008 were below this figure.
The beauty really with Intel is the excess cash the company generates. Last year, the company produced $0.82 per share in free cash flow. Free cash flow is the cash that is left over for shareholders after all expenses related to keeping the company running have been taken into account. That amount compares to a dividend of $0.56, so one can see how much excess cash generating ability the company possesses, and how much room to maneuver there is in terms of the dividend.
Despite the volatility in the earnings per share and net income numbers, Intel (INTC) provides a strong dividend which is both safe and reliable for conservative income-seeking investors. It may not be the highest yield in the market, but it’s certainly secure given a 3 to 5 year outlook.
To see the BestCashCow Dividends page, click here.

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