Hey, Bears: Thanks for Crushing Intel Stock – Its Dividend Yield is Now 4.2%

This is not going to win it any bragging rights in Silicon Valley, but for income-focused investors, the recent pummeling of Intel (INTC) stock has pushed the chipmaker’s dividend yield to a mouthwatering 4.2%. Cripes! A 4.2% yield is utility territory. In fact, Intel currently yields more than Con Edison (ED) and is nipping at the heels of Southern Company (SO).

INTC Dividend Yield Chart

INTC Dividend Yield data by YCharts

Yes, Intel is being hurt by the slowdown in personal computer sales (its chip wheelhouse) and the uptick in mobile platforms (it’s not a big player there, though its amping up its focus on its Atom chip for the mobile market.) But this isn’t a company on the verge of imploding.

INTC EPS Diluted Annual Chart

INTC EPS Diluted Annual data by YCharts

What’s pretty remarkable is that Intel’s PE ratio is now about half that of some of those big utilities, with a more compelling earnings trajectory.

First, the valuation:

INTC PE Ratio TTM Chart

INTC PE Ratio TTM data by YCharts

And recent growth:

INTC EBITDA TTM Chart

INTC EBITDA TTM data by YCharts

INTC Revenue Annual Chart

INTC Revenue Annual data by YCharts

Sure, Intel is a cyclical business and regulated utilities are anything but. Yet Intel’s dividend strategy could be mistaken for a steady eddy utility:

INTC Dividend Chart

INTC Dividend data by YCharts

Actually, that’s not fair to Intel. Its dividend growth has left the mature utilities in the dust. Here’s the same chart converted to show the total expansion in the dividend payout.

INTC Dividend Chart

INTC Dividend data by YCharts

Even if Intel’s dividend growth rate of the past five years was halved it would still be about double the rate of growth in Southern’s payout.

And it’s not as if Intel’s payout ratio is reaching nosebleed territory. The current payout accounts for less than 30% of earnings, though as happened during its last down cycle in 2009, the dividend represents a historically high percentage of available cash.

INTC Cash Div. Payout Ratio TTM Chart

INTC Cash Div. Payout Ratio TTM data by YCharts

Sure, comparing a cyclical growth company with staid utilities is a bit of apples-to-oranges. But in a normal world you’d expect to pay more for the company with the better revenue and earnings growth and less for the slow growth plodder with the reliable dividend. Right now Intel gives you the better valuation with the same compelling yield (and even better prospective dividend growth) as you can get in the utility sector.

Another signal that Intel and its 4% dividend yield are worth a look see is that the company currently earns an Attractive rating from YCharts. Both Con Ed and Southern Company are rated neutral, based on the fact that their current valuations are well above their historic norms. That’s true for most utility stocks these days, in large part because income-focused investors are flocking to the stalwart dividend sector. At these levels maybe it’s time to venture into info tech too.

Carla Fried is a contributing editor at YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

Read more articles about: Company Analysis  

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