One Reason to Love Intel Stock
Intel Corporation (NASDAQ:INTC) has a long history of returning cold, hard cash to investors. That’s what makes INTC stock such a valuable investment.
The company has paid a regular dividend since 1993. That’s 94 straight quarters of payouts. It didn’t matter if the economy was booming or in recession, Intel still paid those dividends.
Consider the late 1990s. Thousands of technology companies lived and died in those short years. Their stock prices soared during the Dotcom Boom, and Intel paid out dividends.
Then investors realized those companies were hollow, and their share prices crashed. But Intel continued to pay dividends.
By 2005, the economy had turned again. Fortunes were being made on Wall Street. Real estate prices seemed indestructible. And Intel? Oh, you better believe it kept paying dividends.
But then the 2008 financial crisis happened. Surely that must have dried up Intel’s resources. The worst financial disaster since the Great Depression is a pretty good reason to suspend dividends. You never know when emergency capital might be needed.
Apparently Intel didn’t get that memo. The company persisted with payouts all through the Great Recession. It even managed to raise its dividend in early 2008.
Now the company offers a hefty 3.4% yield to INTC stockholders. However, the entire microprocessor industry is under pressure, sparking fears that even Intel will have to cut back on dividends. Is it possible?
I suppose anything is possible. It’s possible I could date Rachel McAdams and win the lottery in the same day, but I won’t turn in my resignation just yet. It’s a fair bet that neither of those things is going to happen.
For several decades, the industry’s success was propelled by something called Moore’s Law. It’s a rule that states processing speeds double every two years. Surprisingly, this ad hoc observation by Gordon Moore actually held true for a long time.
Unfortunately, Moore’s Law has been breaking down lately. We are approaching an upper ceiling on processing power, but only within the confines of current system architecture. Intel is working to break that paradigm.
The company has been working on a revolutionary new chip that could shatter Moore’s Law completely. Forget doubling processors every two years. Intel says it has created a chip that is 1,000 times faster than any chip in existence. (Source: “Intel’s new storage chip is 1,000 times faster than flash memory,” The Verge, July 28, 2015.)
Innovation on that scale would take care of Intel’s long-term issues, but what about the short term? Can the company afford its commitment to shareholders right now?
Well, seeing as the company is still cash positive, I absolutely think Intel will keep paying out dividends. The firm raked in $2.0 billion of net profit last quarter, and it has $15.0 billion on hand.
Why would it risk the headline “Intel Misses First Dividend Payment in Decades?” The simple answer is it wouldn’t. If you own INTC stock, rest assured that your dividend is probably safe for a long, long time.