Last update on 2024-06-25

Intel (INTC) - Dividend Analysis (Final Score: 6/8)

Intel (INTC) Dividend Analysis: Final Score 6/8. Evaluate Intel's stable yet fluctuating dividend policy and financial health over the last 20 years using 8 criteria.

Short Analysis - Dividend Score: 6

We're running Intel (INTC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis of Intel's (INTC) dividend policy gives a score of 6 out of 8, suggesting that while the company shows strength in certain areas, there are notable concerns. The criteria assessed include: 1. Dividend Yield: Intel's current yield of 1.4726% is much higher than the industry average of 0.65%. 2. Dividend Growth Rate: The average annual growth rate is approximately 14.93%, although it has shown significant volatility. 3. Payout Ratio: The average payout ratio is 45.99%, which is lower than the 65% benchmark, indicating prudent financial management. 4. Dividend Coverage by Earnings: Coverage has decreased substantially in recent years, raising concerns about future dividend reliability. 5. Dividend Coverage by Cash Flow: Coverage has been extremely inconsistent, with recent years showing negative figures. 6. Stability of Dividends: Dividends have generally increased but saw a significant drop in 2023, highlighting potential instability. 7. History of Dividend Payments: Intel has been paying dividends for 25 consecutive years. 8. Stock Repurchases: Intel has shown reliable and consistent stock repurchases over the past two decades.

Insights for Value Investors Seeking Stable Income

Given the mixed results of the analysis, Intel (INTC) presents both opportunities and risks for investors focused on dividend returns. On one hand, its dividend yield and long history of paying dividends are promising. However, the recent instability in dividend payments and negative cash flow coverage should prompt careful consideration. Income-focused investors should weigh the company’s promising trends against the recent volatility and financial strains. It might be worth looking into Intel if you prioritize a long history of dividend payout and stock repurchases, but proceed with caution due to the recent inconsistencies.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

dividend yield

Intel's dividend yield of 1.4726% is significantly higher than the industry average of 0.65%, which shows that Intel is returning more capital to shareholders in the form of dividends compared to its peers. Historically, Intel’s dividend yields have fluctuated, reaching highs of 5.524% in 2022 and an all-time low of 0.2496% in 2003. While the current yield is lower compared to recent years, it remains above the industry average. Over the last two decades, Intel's dividend yield has consistently been higher than the industry average, suggesting the company's commitment to returning value to shareholders through dividends. This trend also reflects Intel's relatively strong financial health despite the recent decrease in yield. It’s worth noting that the reduced yield for 2023 can be partly attributed to the cut in dividends per share and the fluctuations in stock price. Generally, a higher dividend yield is positive for income-focused investors, but such trends should be analyzed along with the company’s overall financial strategy and market conditions.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage rate of growth of a company’s dividend payments over time, which can signal financial health and shareholder value.

Intel’s dividend per share ratio fluctuated over the past 20 years with values ranging from -49.31% to 100%. On average, the dividend ratio stood at approximately 14.93%. While the average dividend ratio surpasses the 5% benchmark, the significant volatility indicates inconsistency in dividend distribution. This volatility can signal underlying financial instability or a strategic decision by management to retain earnings for growth. The sharp decline in 2023 might be concerning, suggesting potential struggles or significant reinvestment. Overall, although the trend exceeded the 5% growth target, its inconsistency is less appealing.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio represents the percentage of earnings a company distributes to its shareholders as dividends. It is important for Intel (INTC) because a lower payout ratio indicates that the company retains more of its earnings for growth and investment, which can be beneficial for long-term sustainability.

Analyzing Intel's average payout ratio over the last 20 years, we observe that the company maintained an average payout ratio of 45.99%, well below the 65% threshold. This is a positive sign, suggesting that Intel has consistently retained a substantial portion of its earnings to reinvest in its business operations and growth initiatives. Specifically, the payout ratio fluctuated significantly, peaking at 183.58% in 2023 due to extraordinary circumstances, likely including substantial changes in earnings or dividend policies. Conversely, the lowest payout ratio was observed in 2003 at 9.39%. As a general trend, maintaining a payout ratio below the 65% benchmark reflects prudent financial management and augurs well for Intel’s long-term stability and shareholder value.

Dividends Well Covered by Earnings?

Earnings per Share (EPS) to Dividend per Share ratio refers to how much earnings a company generates for each share, compared to the dividends paid out. It indicates whether the company is earning enough to cover its dividend payments. Ideally, EPS should be significantly higher than dividends per share, ensuring that dividends are sustainable even in unfavorable business periods.

Analyzing Intel's EPS to dividend ratio from 2003 to 2023, we observe a long-term trend depicting variable but increasingly concerning figures. During the early to mid-2000s, EPS sufficiently covered dividends, evidenced by higher ratios above 0.3. This trend altered from 2019, with a sharp drop between 2021 and 2022, making it conspicuous that dividends were not sufficiently covered by earnings in these latter years. From 2003 to 2008, the ratios were quite healthy, averaging above 0.45, indicating that Intel had substantial earnings to cover dividends. Post-2018, the coverage ratio notably slumps (2021-2022), going as low as 0.03 in 2023 due to poor earnings, given the adverse ratio of 1.83. Restricting dividends more than double the EPS values for multiple years depicts Intel's rising financial strain. Long-term, the trend of marginalized EPS to Dividend ratio puts pressure on future dividend reliability, rendering this a negative trend.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow means that a company's free cash flow should be sufficiently high to cover the dividend payments made to shareholders. This is important because it ensures that the company is generating enough cash from its operations to reward shareholders without sacrificing potential growth investments or increasing debt.

For Intel (INTC), the trend of dividends being well covered by cash flow shows a fluctuating pattern over the years. Starting from just 6.67% coverage in 2003, there was a general improvement up to 2005 where coverage went above 20%. However, post-2018, the reliability of dividend coverage waned significantly, culminating in negative coverage in 2022 and 2023 (-62.36% and -21.62%). This negative coverage indicates that Intel had to either dip into reserves or increase debt to sustain dividend payouts, primarily attributed to significant declines in free cash flow during these years (from $20.93 billion in 2020 to negative figures in 2022 and 2023). In general, a consistent and positive dividend coverage ratio closer to or exceeding 100% is ideal, indicating the company is in a strong financial position to maintain and potentially grow its dividend payouts).

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is crucial for income-seeking investors.

Looking at Intel's dividend per share data over the past 20 years, it is noticeable that the dividend has generally increased over time. From $0.08 in 2003, the dividend rose to as high as $1.46 in 2022. However, in 2023, the dividend per share dropped significantly to $0.74, which represents a decline of approximately 49% compared to the previous year. This is far more than the 20% threshold mentioned, which highlights a period of instability. The strong performance in dividend stability, up until 2022, was beneficial for income-seeking investors, but the dramatic drop in 2023 raises concerns about future reliability.

Dividends Paid for Over 25 Years?

The criterion assesses whether the company has a history of paying dividends for at least 25 years. This history is an indicator of reliability and stability in shareholder returns.

Intel (INTC) has paid dividends continuously from 1998 to 2023, spanning 25 years. The ability to consistently pay dividends over such a long period is a positive indicator of Intel's financial stability and commitment to returning capital to shareholders. During this timeframe, Intel's dividend per share has generally increased, indicating growth and potentially increasing profitability over time. Therefore, meeting this criterion is good and positions Intel favorably among dividend-paying companies.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the consistent buyback of company shares, which usually leads to a reduction in the number of outstanding shares. This is crucial because it signifies the confidence of the company in its own financial health, and often leads to an increase in shareholder value.

Analyzing Intel's data over the past 20 years, we see a substantial reduction in the number of outstanding shares, signaling consistent stock repurchases. Starting from 6.62 billion shares in 2003 to 4.19 billion shares in 2023, Intel has consistently repurchased shares across multiple years. The percentage decrease per year, calculated at an average rate of -2.2335%, is a healthy indication of their commitment to enhancing shareholder value. Key buyback years include robust activity from 2004 to 2021. However, a slight increase in shares in 2007 and 2023 interrupts this trend, highlighting potential strategic pauses or acquisitions adding shares. Overall, this criterion showcases Intel's reliable and consistent stock repurchase strategy, adding positively to shareholder confidence.