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Intel Corporation Message Board

  • galba_imperator galba_imperator Jan 25, 2013 5:01 PM Flag

    How Safe is the INTC Dividend?

    They say they'll return 40% of earnings to shareholders. According to the (perhaps incorrect) yahoo numbers they are currently returning 0.90/2.13 = 42%. The $6 billion buyback will adjust the current values to about 40.2%. In any case, they are hovering near the commitment level of 40%. If earnings should take a 10% hit can we expect divvy will too? I would hope the visionary management wouldn't do that. I would hope even moreso to see some real growth in top and bottom line....but hope springs eternal. Sentiments?

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    • It is not a problem and I don't think Intel will think about reducing the dividend until it got to 40% of cash flow which is a "wider moat" than "profits".

      A clip from a seeking alpha article about safety of dividend.

      5 Cash-Rich Dividend Stocks With Potential For Considerable Growth
      January 14, 2013

      Intel Corporation (INTC), the world's largest semiconductor maker, has 14% of its total assets in cash and equivalents and a ratio of free cash flow to net income of 0.68. The company generates consistently positive free cash flows. Over the past half-decade, its EPS and dividends grew, on average, by 22.8% and 12.9% per year, respectively. The company's long-term annualized EPS CAGR is forecasted at 9.2%. The secular decline of the PC market has weighed on Intel's performance, and the company looks inclined to boost its growth in the mobile device chip business gravitating toward smartphones and PC tablets. This year, Gartner expects weak PC sales, recovering semiconductor sales, and surging smartphone unit production growth and media tablet production. Intel yields a high 4.1% on a payout ratio of 39% of trailing earnings and 58% of trailing free cash flow. We like the company's wide moat, low debt, high dividend, and relative valuation well below the company's historical metrics. Its forward P/E of 12.2x is a large discount to its peers on average. Fund managers Ken Fisher and Jim Simons, and Jean Marie Eveillard's First Eagle Management hold hundreds of millions invested in this stock.

 
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