Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Intel in Focus
Intel (INTC - Free Report) is headquartered in Santa Clara, and is in the Computer and Technology sector. The stock has seen a price change of -0.2% since the start of the year. The world's largest chipmaker is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 2.21% compared to the Semiconductor - General industry's yield of 1.01% and the S&P 500's yield of 1.88%.
In terms of dividend growth, the company's current annualized dividend of $1.32 is up 4.8% from last year. Over the last 5 years, Intel has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.88%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Intel's payout ratio is 26%, which means it paid out 26% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for INTC for this fiscal year. The Zacks Consensus Estimate for 2020 is $4.99 per share, representing a year-over-year earnings growth rate of 2.46%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, INTC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).