Intel (INTC, Financial) announced a quarterly dividend of 30 cents, payable on Sept. 1, in the company’s final month of its third quarter. The dividend has an ex-dividend date of Aug. 6.
The quarterly dividend continues the company’s dividend commitment, with consecutive quarterly dividends paid for over 10 years. Ranking among the top 60% of dividend yields in the Dow Jones at 2.21%, it also continues to display a strong commitment to the shareholder dividend with a trailing 12-month payout ratio of 48%.
Intel has been steadily increasing its dividend over the past five years with annualized one-year, three-year and five-year dividend growth rates of 3.61%, 6.18% and 4.37%, respectively. Its latest earnings results showed continued revenue and earnings per share growth with strong free cash flow also supporting the dividend.
As the dividend continues to remain an important factor for the company, so does free cash flow. Free cash flow has been consistently high over the past four years, averaging approximately $11.5 billion. Revenue has been a positive contributor, while earnings per share has been slightly faltering.
Revenue
In its most recent first quarter earnings report Intel showed quarterly revenue of $16.1 billion, increasing 8.8% from the comparable quarter and beating estimates by $1.02 billion. Revenue was up in both PC-centric and data-centric sales with data-centric sales outperforming. Data-centric sales showed comparable quarter revenue growth of 25% while PC-centric revenue grew at a rate of 3%. For the second quarter, analysts estimate revenue of $16.15 billion, increasing 9.30% from the second quarter of 2017.
Earnings
Net earnings growth has been trending slightly downward for Intel over the past three years. But the first quarter of 2018 outperformed analysts’ expectations. Earnings per share for the first quarter were 87 cents, increasing from 66 cents in the comparable quarter for a gain of 32%. Annual earnings per share growth for the past three years has averaged -4.85%.
Comprehensively, operating income, Ebit and Ebitda have all been fairly constant. Operating income has averaged approximately $17.4 billion with an average annual growth rate of 10.42% over the past three years. During the three-year timeframe, Ebit per share has averaged $3.92 with an 18.5% annual growth rate. Meanwhile, Ebitda has averaged $27.1 billion with a growth rate average of 10.95%.
As such, a decrease in shares outstanding has been the primary driver of the decreasing earnings per share growth, but the overall health of earnings has been relatively positive from an operating income, Ebitd and Ebitda perspective.
Analysts are also optimistic on earnings for the second quarter of 2018. Estimates show analysts expecting $1.08 per share for second quarter earnings, increasing from 72 cents in the second quarter of 2017 and 87 cents in the previous quarter.
Stock value
As of July 20, Intel’s stock price closed at a value of $51.91. Year to date, the stock has a return of 13.76%. Annualized returns including the dividend over the past 10 years have substantially rewarded investors at the following rates:
Source: Morningstar
Analysts are expecting more positive results from the company on July 26 when it reports second quarter earnings. Estimates for the stock price are now as high as approximately $60. Thus, the dividend makes investment in the stock even more compelling in the current timeframe leading up to the Aug. 6 ex-dividend date.
Disclosure: I do not currently own Intel.
