I looked at all the dividend stocks in the Dow that pay over 3% to add to my Intel stock. But Intel still looks to be one of the healthiest dividend stock to own at this point and years to come thanks to their huge huge technological lead times.
Currently Intel is paying a yield of about 3.1% against its stock price of $26.70 And that's only about 35% of its net income reported last year. But I looked at other aspects of Intel's health as well. First of all, growth. Growth is expected to be about 5% per year on average for the next 2 years. Which will no doubt prove to be extremely conservative given the fact that Intel is very confident that it will grow high single digits this year and another low double digits to teens next year. It's forward PE against the very low expectations is still low at only 10.23 On average, Intel has beat analysts expectations by 10% for the past 4 quarters. And each time has guided higher than expectations as well. As for cash on hand, Intel has about $15 Billion cash and equivalents while having only $7.5 Billion in debt. And it's technology is clearly unmatched. With a 3 to 5 year lead over its nearest competitors in chip faprication. Looking at all these factors, Intel could very well raise its dividend to be about 40% of what it could easily earn in 2013, which could be about $3 a share. That's a dividend payout of about $1.20 per share. Which yields about 4.5% against today's stock price. If Intel has policy of paying about 40% against its gross earnings or cash flow, that number could be significantly higher. Somewhere in the order of about $1.60 a share which will yield over 6% against today's stock price. Let's look at how that compares to the highest dividend payer in the Dow 30 today which is AT&T at 5.9% yield. AT&T is paying dividend which is about 80% of its net earnings. As for Verizon, they pay about 93% of their earnings. Proving that Intel has plenty of room to grow its dividend. I think I will stick with Intel.
I'm looking at the big picture overall. If you look at what the analysts' expectations were prior to Intel's Q3 earnings announcement, where they beat Q3 expectations in revenue by $1 Billion and guided much higher than expectations, Intel did better than analysts expected at that time. It's important to note here that analysts have had to chase Intel's guidance each and every quarter upward. So the current expectations by analysts on average for the rest of the year will most likely have to rise on a quarter by quarter basis. And relative to those expectations, Intel has proven to beat them nevertheless. As for the Q4 revision in guidance was solely due to supply constraints which I'm sure Intel will be better prepared for in the future with more variations and availabilities in storage such as SSD's. I'm looking at Intel's current guidance for the 2012 year of high single digits. I think this in itself will be proven to be very conservative as the year progresses. As the current average estimates look for a low single digits growth, analysts will once again chase Intel's guidance upward. With the huge need for internet connectivity on a constant basis along with the affordability factors of many highly populated emerging markets coming into play over the next few years, Intel could easily surpass the $3 EPS mark in 2013. Proving the current estimate of $2.60 extremely low. Giving Intel a much more attractively average annual growth rate of 12.5% for the next 2 years at least. I have strong confidence that this will be a reality. In fact, it will be expected within this year by most analysts as well.