At a time when technology stocks were debating whether to become part of the dividend-paying world, Intel (NASDAQ:INTC) became one of the first technology companies to foray into this world. Today, it has a steady income of approximately 3% after intensely increasing its quarterly disbursements in the 2000s. However, a number of dividend investors are concerned why Intel is refusing to increase dividend since 2012’s last quarter, causing apprehensions that it believes its growth enterprises may not pay off enough to validate a higher disbursement. There are two things dividend investors should know about Intel (NASDAQ:INTC ) after discussing these apprehensions and evaluating the chip-making conglomerate’s dividend stock characteristics
- 1. Recent years have seen Intel’s share repurchase decline rapidly
A long standing debate between stock analysts argues whether organizations should pay off dividends or buyback stock shares. Each may be an efficient way to return shareholders capital, but both have pros and cons. Dividend investors view quarterly payouts as an inherent guarantee to sustain dividends for the future, but view repurchases as a one-time thing that may not take place again. However, dividend investors who capitalize on taxable accounts, believe repurchases help circumvent the tax implication issues of dividend payments.
Consequently, Intel (NASDAQ:INTC) may have decided to keep a constant dividend in these last few years because its focus could be on share buybacks instead, especially since stock prices have been quite low so repurchases seems like a good use of shareholder capital. Subsequently, after seeing a high, in 2011, of $14.3 billion, this chip-maker’s share buybacks in 2012 were just $5.1 billion and, in 2013 $2.4 billion. Though activity looks better in 2014, there is still an earnings decline between 2011 and 2013, which may be why Intel (NASDAQ:INTC) is thinking twice about making more dividend increases before re-establishing its business and improving its revenue growth
- 2. Intel’s major dividend source could be a PC rebound
Investors have had a long-standing issue with Intel (NASDAQ:INTC) over its continued dependence on its PC business even though PC sales have been down for years since the launch of tablets, smartphones, etc. quelled the traditional PC or laptop demand. Intel (NASDAQ:INTC) was slow in its response to participate in the growing popularity of the latest semi-conductor devices, and was over taken by mobile-centric companies like Qualcomm (NASDAQ:QCOM). This resulted in the belief, among analysts, that though Intel (NASDAQ:INTC) may yield an adequate cash flow, it PC-demand may nosedive, leaving the conglomerate to become a shell of who it was.
However, in the beginning of 2014, Intel (NASDAQ:INTC) saw a rise in its PC-centred sales which helped raise the share price of its stocks. By moving beyond its skills of providing constant technical support to Microsoft’s (NASDAQ: MSFT) main operating-system software, users had the option of choosing to buy new computers complete with newer (already installed) operating-system software versions or upgrading the hardware. It seems computer users chose the first option, and since Intel (NASDAQ:INTC) still has a big PC processor market share, these sales benefitted its revenue growth. The truth is that Intel’s main business will always be the PC, even though it now dabbles in the data analytics and cloud computing world, and may help yield a good cash flow to substantiate dividend increases in the future.