This time it’s the fight for Dividend Investors and the contenders are Intel Corporation (NASDAQ:INTC) and QUALCOMM, Inc. (NASDAQ:QCOM) and with a heavy heart Intel will have to pass the flaming torch to the new kid on the tech block. In a Motley Fool article both companies were analysed on the basis of their dividend prospects and it is needless of to say which one of them came out as a shining star.
There are two lines of comparisons that we will be carrying out here. First, the dividend growth and secondly, a measure of dividend stability based on free cash flow of the two companies.
The dividend yield on both stocks is fairly close. The article reported it to be 2.3% for QUALCOMM, Inc. (NASDAQ:QCOM) and 2.6% for Intel Corporation (NASDAQ:INTC) based on recent prices. However, Intel’s slow growth has limited its five year compound dividend growth rate to 10% while there was little that held QUALCOMM, Inc. (NASDAQ:QCOM) back from posting a 20% dividend growth based on annual compounding for the last five years.
As far as free cash flow is concerned, Intel Corporation (NASDAQ:INTC) generated $3.4 billion in the first two quarters of 2014 and dividend payments amounted to $2.2 billion. This means that dividend payments constituted about 65% of the free cash flow.
Now compare this with QUALCOMM, Inc. (NASDAQ:QCOM)’s free cash flow payout ratio of a meagre 28% and remember that it is providing almost the same dividend yield as Intel Corporation (NASDAQ:INTC). The relevant free cashflow and total dividend payment figures for Qualcomm are $6.3 billion and $1.8 billion respectively for the last three quarters, according to the Motley Fool article.
This shows that there is plenty of room left in QUALCOMM, Inc. (NASDAQ:QCOM)’s free cash flow for the company to keep on increasing their dividends in future to keep up with the 20% dividend growth figure quoted above. The same cannot be unfortunately said for Intel Corporation (NASDAQ:INTC) who already has a lower dividend growth rate which forms a higher percentage of its free cash flow.
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