How High Are Intel Dividend Aspirations (INTC)

Intel Corporation (NASDAQ: INTC) is defying the old status quo of big technology companies which do not pay what most would consider real dividends.  Today’s quarterly dividend hike to $0.1575 from $0.14 is far from the first hike.  Even when you consider a 2% share gain to $20.20, the old dividend yield was already 2.7%.  The new dividend yield is 3.1% based on today’s share price.  It begs one to ask, “How high does Intel want its payout to be?”

As a share’s price rises, its yield decreases for investors paying higher share prices.  To illustrate this, Intel’s stock could rise to $25.00 and the new dividend yield after the increase would still be just a tad above 2.5%.

The 52-week trading range is $12.05 to $21.27, but that is misleading because Intel was a $25.00 stock less than two years ago.  This marks the fourth dividend hike since the end of 2005.

The company has incredibly high margins and is sitting on a $16 billion mountain of cash.  With the company now back to making over $0.30 per quarter in earnings, this dividend is still cash-accretive by far.   Assuming Intel meets its December 2010 fiscal targets of $1.46 and keeps that dividend static for 2010 at $0.63 and assuming it makes no solid cash acquisitions, then Intel can still add about $4 billion or more to cash in 2010.

Intel may wait for higher share prices before it boosts its dividend again, but the company has proved it wants to increase its dividends through time just like a solid industrial company.  Or even a utility.

JON C. OGG