If you’re an investor in chip giant Intel (NASDAQ:INTC) or you’re thinking about becoming one, then you might be someone who also values income. Intel shares don’t offer the biggest dividend yield — 2.53% at their current price — but that’s a respectable yield nonetheless.
Although Intel’s track record isn’t perfect — after boosting its dividend to $0.225 per share per quarter for its Aug. 3, 2012, payment, the company didn’t raise its dividend again until the Feb. 4, 2015, payment — the company’s recent dividend history (as well as its history before the “gap” mentioned above) suggests a commitment to annual dividend increases.
Intel has paid its current dividend — $0.30 per share per quarter — for four quarters in a row now. I’d say that it’s a good bet that when the company next declares its dividend, something that should happen later this month, that dividend will be increased.
Capping off a successful 2018
Intel’s financial performance over the course of 2018 was exemplary. The company went into the year expecting sales to come in at $65 billion and earnings per share (EPS) of $3.55 on a non-GAAP basis. Those estimates now sit at $71.2 billion and $4.53, respectively. (Intel CFO and interim CEO Bob Swan said on the company’s Oct. 25 earnings call that “we do expect fourth quarter upside from here will be limited,” so don’t expect Intel’s actual 2018 performance to come in dramatically ahead of its guidance.)
It’s also worth noting that although the company has yet to issue formal financial guidance for 2019 (that should happen later this month when the chip giant reports its earnings results), Swan did say on the October earnings call that “[as] we look forward to 2019, we expect to deliver another record year for the company.”
So not only should the company’s 2018 EPS be substantial, but the following year — if Swan is right — won’t see either revenue or EPS regress. Analysts’ consensus estimate currently calls for Intel’s revenue in 2019 to come in at around $73.4 billion (up about 3.1% from estimates for 2018) and EPS to hit $4.57 (a 0.88% year-over-year increase).
That should be good news for the dividend and that’s important because Intel, like any serious dividend payer, needs to do its absolute best to avoid having to ever cut its dividend and to make sure that it has room, even when times get tough, to boost its dividend.
Intel arguably made a mistake early in the decade with respect to its dividend strategy. The company boosted its quarterly dividend from $0.1575 to $0.1812 in early 2011, which was certainly the right move. However, the company increased its dividend again in mid-2011 after just two payments at the $0.1812 rate. Of course, things were going great for Intel back then, but it wasn’t long before the company hit hard times when the PC market began to decline in late 2012.
That prolonged rough patch is why the company didn’t raise its dividend from August 2012 until November 2014. Had Intel stuck strictly to annual increases, it might’ve been able to shorten the stretch during which it didn’t deliver a dividend increase.
Indeed, even if Intel had warned investors that while fiscal 2018 was shaping up to be great, 2019 wouldn’t be as good, I’d still expect a dividend increase (since Intel probably wants to keep income-oriented investors happy), but a smaller one than I think Intel will ultimately deliver.