Intel Corporation (NASDAQ:INTC) is a blue-chip technology firm with a lengthy history of dividend payments. Intel today has a yield of more than 4%, which has not happened very often in the past. In this post, I will examine Intel’s capacity to continue paying its dividend and look at earlier occasions when Intel yielded more than 4%. Intel has a strong track record of dividend payments. Intel has paid dividends for 28 consecutive years and has increased its payout for seven consecutive years. Intel currently has a forward yield of 4.08%. It now has a forward dividend of $1.46 and a market value of $35.38.
In my perspective, Intel Corporation’s capacity to pay its dividend is unquestionable. Intel’s current ratio of 1.86, according to its most recent 10-Q. That is an excellent ratio. Intel’s free cash flow is an unfavorable measure. That is a minus number. Cash flow from activities less capital investments equals free cash flow. According to Intel’s most recent 10-Q, the company generated $800 million in cash flow from operational operations in the most recent quarter. Intel invested a total of $7.2 billion in capital. As a result, free cash flow is a negative $6.4 billion. It is not what investors want to see when it comes to free cash flow.
Intel Corporation’s Cash Flow
Intel anticipates that its free cash flow situation will improve by the end of the year. In the most recent earnings call, Intel’s Chief Financial Officer Dave Zinsner noted that the company expects adjusted free cash flow to be minus $1 billion to negative $2 billion for the year. In other words, Intel anticipates positive adjusted free cash flow for the remainder of the year. Zinsner believes that the company’s “financial bottom” is in Q2 and Q3. Intel’s long-term goal is free cash flow to equal 20% of revenues. While I would prefer to see positive free cash flow right now, I am satisfied with Intel’s business approach that has resulted in this temporary negative free cash flow.
Intel Corporation currently has a yield of 4.08%, as previously stated. When I discovered this, I pondered how many times Intel had yielded more than 4% in the past. The answer is not very often. Intel generated more than 4% in October 2012, January 2013, August 2013, and October 2013. Again, each of these instances proved favorable for investing in Intel stock. Those returns appear to be extremely good to me. The past six times Intel generated more than 4%, future returns were all positive one year, two years, and three years out. The poorest one-year performance was 17%.
While I cannot be certain, I think there were several worries about Intel’s corporate strategy, competitiveness, market penetration, chip technology, capital allocation mix, etc. That is what led the stock price to plummet to the point where the dividend yield hit 4%. Share prices are on sale during times of uncertainty. This time appears to be no exception. Concerns have been raised regarding Intel’s lack of penetration into the mobile phone industry, competition from other chip firms, Intel’s dependency on the Wintel standard, a weak balance sheet, and so on. That moment looks to be now.
I believe Intel Corporation is a smart buy at its current pricing. I am not concerned that Intel may reduce or discontinue its dividend in the future. I believe Intel Corporation will increase its dividend next year as its free cash flow increases. When Intel Corporation has yielded more than 4% in the past, it has proven to be an excellent opportunity to go long with Intel. With Intel’s current yield of 4.08%, I believe this is an ideal moment for the long-term investor to purchase some shares.
Featured Image: Megapixl @Drserg
