Is Intel a buy for dividend investors?
Only if you're looking for a high-yield, blue-chip tech stock that offers a lower beta than the S&P 500. It may not be a flashy growth-oriented company anymore, but it doesn't need to be.
Its business is well-established and going nowhere by the look of the digital landscape. You can count on Intel to produce microchips for the tech market and cash returns for investors for many more years. That's good news for risk-averse income investors.
Intel Corporation (NASDAQ: INTC) is a U.S.-based multinational semiconductor company headquartered in Santa Clara, California. The company was founded in 1968 by Gordon Moore, who came up with Moore's Law. Intel is central to the personal computer (PC) market and is the world's largest semiconductor company by revenue. Its products exist in most commercial PCs, laptops and tablets. It makes microprocessors, motherboards, interface modules, memory chips, GPUs and embedded processors. Revenue in 2022 topped $63.5 billion.
As of 2023, the company operates in five segments, but the top two are client computing and data center. Client computing is more than 50% of the business and includes the core PC-related businesses. The company's growth vehicle is the data center group, which makes up about 33% of its revenue. It supplies microchips, processors and other components to the data center and data storage industry. The other segments are non-volatile memory, the Internet of Things (IoT) and programmable solutions, which are each less than 10% of the business.
Intel Dividend History
Intel has been paying a regular quarterly dividend since 1995. The company has only ever increased the payment and has made more than 20 distribution increases since initiating the payment. The latest string of consecutive annual increases began in 2015 and had the count up to eight in 2023.
Is Intel a good buy for dividend investors? The payout history suggests so. Remember, it's not about how many dividend stocks to own, but their quality.
Intel Dividend Ratings
Intel's dividend is not only attractive for its yield, but it rates well too. The stock is the highest-yielding in the semiconductor arena and among the very highest-yielding in tech and the S&P 500. The payout ratio tends to run about 50%, which is manageable due to little debt. The leverage ratio in early 2023 was below 0.5% and in very safe territory. The only downside is the distribution compound annual growth rate (CAGR) is on the low side at 6%, but this is a sustainable pace, so not a deal-breaker. If you are wondering how to invest in top dividend stocks, looking for stocks with this metric is an excellent way to do it.
Intel Credit Ratings
Intel tends to have very high credit ratings as well. The top rating agencies rated the company's debt at A1/A+ or better, which is well above investment grade.
Intel Analyst Ratings
Intel is a closely watched stock by analysts, which helps to support the price action. Over 30 analysts cover the stock; they have had it pegged at a "firm hold" for years. The price target tends to fluctuate with market conditions and can give good signals for when to buy and when to sell dividend stocks.
Intel Pros and Cons
Intel is a high-quality blue-chip stock with many attractive qualities, but there are also some risks for investors. Is INTC a buy? That's for you to decide for yourself.
Among the pros regarding Intel are its value, yield, industry and outlook, which are all good reasons for why to buy a dividend stock.
- Intel tends to trade in line with the S&P 500, a much lower valuation than most of the semiconductor industry. In this regard, the stock has value and a high yield for investors.
- Intel's dividend tends to run at the high end of the semiconductor, technology and broad market ranges, which makes it an attractive payout for income investors. The yield in early 2023 was roughly 5%, and it came with an outlook for distribution growth as well.
- Intel is a dividend growth stock. Dividend growth stocks offer compounding yield on the original investment and price stability. Intel is not immune to rallies and sell-offs, but the day-to-day action tends to be less volatile than the S&P 500.
- Intel is well-positioned in the semiconductor market and the among the largest players. Intel is also a foundry that can make its own chips and chips for other semiconductor companies.
Among Intel's cons and detracting factors are the competition, valuation and its position in the PC industry.
- Intel has come under increasing competition over the past decade and has lost market share and prominence. These challenges have hurt the company's growth outlook and share price.
- Intel trades at a discount to the industry for a reason, and it may not recover its once lofty P/E multiple. Investors buying the value with the expectation the stock will see a price-multiple expansion may find themselves caught in a value trap.
- Intel's business is diversified but still centered firmly in the PC industry, which has been on the skids for a long time. PCs are still an important part of most people's lives but have been supplanted in many ways by laptops, tablets and mobile devices.
Dividend Capture Strategy for Intel
The dividend capture strategy for Intel is simple in concept but can be tricky to execute. Buy the stock on or before the date of record and then sell it as soon as the next day. The next trading after the date of record is called the ex-dividend date because it is the first day the stock will trade — new buyers won't be eligible for the upcoming payment. This may not seem very clear, but it is an essential concept for investors who want to learn how dividend stocks work.
What is Intel's Date of Record?
The date of record is the day the company records all stock owners. All owners at the close of business on the date of record are eligible to receive the next dividend payment. You must own the stock at the close of trading on the date of record. The company should clearly telegraph the date of record and should be listed with other pertinent information on the dividend declaration.
What is Intel's Ex-Dividend Date?
Intel's ex-dividend date is the day after the dividend date of record or the first trading day after that. The ex-dividend date is the first day the stock trades without the value of its dividend hence the name, ex-dividend day. It is also the first day you can capture the recently declared and recorded dividend, sell the stock and still receive the payment. The bad news is that stock prices often fall by the dividend amount or more on the ex-dividend date for this very reason.
Key Points of Intel's Dividend Capture Strategy
- Investors aim to capture the dividend by owning the stock for the least amount of time possible.
- Three dates are important to the strategy: the day the dividend is declared, the date of record and the ex-dividend date.
- The only requirement to receive the dividend is to own the stock at the close of trading on the date of record.
- The first-day investors can sell the stock and still receive the declared dividend is the ex-dividend date, or the first trading day after the date of record.
- Dividends will automatically go into each investor account on the distribution day. The day of distribution is listed on the declaration and usually comes a few weeks after the ex-dividend date.
Intel: A High-Yielding Blue-Chip Tech Stock
Intel may not be the juggernaut it once was, but it is still a fundamentally sound blue-chip quality tech stock that pays a high yield. Investors looking for safety and income should consider this stock for their portfolios. Those looking for growth should turn their attention elsewhere.
Here are the answers to the most frequently asked questions about Intel's dividend.
Does Intel pay a dividend?
Intel pays a dividend, and it is a healthy one, too. Not only is it among the highest yields in the tech sector, but the payout ratio is low and distribution growth is on the table.
Does Intel pay monthly dividends?
Intel does not pay a monthly dividend. Intel pays a quarterly dividend announced at the end of each quarter but before the quarterly earnings report.
What is Intel's yield?
Intel's dividend yield will vary along with the price of the stock, but it tends to be among the highest in the technology sector and semiconductor industries. The payout ratio in 2023 was a remarkable 44%, suggesting distribution growth will continue for the foreseeable future.