Intel Corporation (INTC): A Technology Monopoly Paying Safe, Growing Dividends

Despite its sensitivity to the economy, Intel’s business model is extremely strong. As seen below, the company has been a free cash flow machine over the last decade despite its capital intensity. Businesses that throw off predictable cash flow each year are much better positioned to sustainably pay and grow dividends, and Intel is no exception.

Source: Simply Safe Dividends

Just like we observed in our analysis of Cisco Systems, Inc. (NASDAQ:CSCO), Intel’s operating margins are excellent, especially for a capital-intensive technology hardware company. High and stable margins usually indicate an economic moat, and Intel’s essential monopoly of the microprocessor PC and data center markets has allowed it command high prices for its technology.

Intel’s balance sheet adds to the safety of its dividend as well. We can see that the company has more cash than debt on hand, and the business generated about $11.7 billion free cash flow last year compared to total dividend payments of roughly $4.6 billion. Intel has plenty of financial strength.

It’s hard not to feel great about Intel’s dividend. While demand for the company’s microprocessors and chips is somewhat sensitive to the broader economy, Intel is a cash cow with healthy payout ratios, a strong balance sheet, and persistently high margins.

Dividend Growth Score

Our Growth Score answers the question, “How fast is the dividend likely to grow?” It considers many of the same fundamental factors as the Safety Score but places more weight on growth-centric metrics like sales and earnings growth and payout ratios. Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.

Intel’s Dividend Growth Score is 69, which suggests that the company has above-average dividend growth potential. Management last boosted Intel’s dividend by 8.3% at the end of 2015, and the company’s modest 40% payout ratios indicate there is plenty of room for further dividend growth.

While Intel’s dividend growth streak is less than five years long, the company has paid uninterrupted dividends since the early 1990s. As seen below, Intel has also increased its dividend by nearly 9% per year over the last five years. We expect mid-single dividend growth to continue.