Normally you wouldn’t expect a chipmaker to pay you a three-percent dividend yield. But then again, Intel Corporation (NASDAQ:INTC) is not your average chipmaker. In fact, other than its great dividends, there are many other reasons why INTC stock is worth keeping an eye on.
INTC Stock: Solid Dividend Growth
Like every other tech company, Intel stock suffered badly when the dotcom bubble burst in 2000. But since then, the company’s quarterly dividends have never declined. From 2000 to today, its quarterly dividends have increased from $0.02 to $0.26 per share. That’s a compound annual growth rate of 17.4%! (Source: “Intel Corporation Dividend Date & History,” NASSDAQ web site, last accessed March 17, 2016.)
With this kind of dividend growth, you’d imagine that the stock is going to be expensive. And INTC stock did have a pretty good run. In the past five years, it has climbed more than 60%.
But that doesn’t necessarily mean that Intel stock is expensive, because the company’s earnings have been growing just as impressively. Trading at $32.02 today, INTC stock has a price-to-earnings multiple of just 13.71 and a handsome dividend yield of 3.25%.
Of course, Intel is not the only company with a decent yield. There are quite a few companies paying equal or more than Intel. What really makes the company special is its huge growth potential.
A Dividend Stock with Huge Potential
If you think that Intel is done because the PC market is not as hot as it was before, think again. Going forward, there are many “next big things” that could use Intel’s expertise.
Take augmented reality (AR) as an example. According to Goldman Sachs, the combined virtual and augmented reality market could become an $80.0-billion industry by 2025. (Source: “Virtual Reality Could Become an $80 Billion Industry: Goldman,” CNBC, January 14, 2016.)
What does Intel have to offer? Well, the company has its breakthrough “RealSense” technology, which would be crucial for implementing human-computer interaction techniques.
More recently, the company has decided to take its RealSense technology a step further. The Wall Street Journal reported earlier this month that Intel is in the process of developing an AR headset. (Source: “Intel Working on Augmented-Reality Headset,” The Wall Street Journal, March 2, 2016.)
Intel will probably not be selling the headset directly to end-users, though. Instead, it would most likely offer the headset design to other manufacturers.
Note that augmented reality is not the only market Intel plans to enter. The company has been developing components for new markets, including fitness tracking devices, smart jewelry, and drones.
The Bottom Line on INTC Stock
Opening new markets is great, but at the end of the day, the company has to make money. Luckily, Intel is doing quite well. In the most recent quarter, both Intel’s data center and Internet of Things groups reported record quarterly revenue. (Source: “Intel Reports Full-Year Revenue of $55.4 Billion, Net Income of $11.4 Billion,” Intel Corporation, January 14, 2016.)
With great dividends, huge potential, and a relatively low valuation, INTC stock could be a bargain in today’s technology sector.