Intel (INTC) is Boosting Our Income by 4.8%
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Investing in dividend growth stocks is one of the best sustainable income streams that you can build. While it certainly takes a lot of capital to invest and bring that income in … it doesn’t have to happen overnight.
For example, my wife and I will make around $2,400 in dividend income this year (2017). This didn’t just happen though. We started investing in dividend stocks almost 9 years ago and slowly built the foundation of our portfolio … which is just starting to takeoff.
And while investing new money into stocks is the fastest way to build this income stream, it is important not to forget about other ways to grow your portfolio. One way is to automatically reinvest your dividends into partial shares of stock through DRiP. This is an easy way to grow your income that doesn’t cost anything.
Another opportunity to grow your income stream is through company dividend increases. Most companies (not all) that we invest in give us an annual raise in the form of these dividend increases. Some raises are less than 2%. Others are over 20%. Averaged out across 30 stocks and we generally get a 5% – 7% raise each and every year.
That is just an awesome feeling knowing we get this raise every year … and don’t have to do a lot of work for it.
One company that gives us a raise most years (but not all) is Intel (INTC). Despite not getting a raise each and every year through a dividend increase … this company has been able to maintain it’s payout which keeps our income machine churning.
INTC Shareholders Get a 4.8% Raise
Intel (INTC) recently announced an annual dividend increase. After 10 consecutive years of dividend increases, the company was removed as a Dividend Contender in September, 2014 for failing to raise it’s dividend.
Since being removed from the list, the company has been able to maintain it’s dividend and even raise it 3 additional times … including this most recent bump.
Company shareholders will now receive $0.2725 in quarterly dividends for each share they own … instead of $0.2600 paid last quarter. This increase comes in just short of our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for INTC up to $1.09 per share compared to $1.04 last year.
Overall, that is a 4.8% increase in dividend income.
How Much Extra Income?
We currently own 47.933 shares of INTC in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for INTC up to $52.25, compared to $49.85 last quarter.
That is an annual dividend income increase of $2.40 – not huge but every little bit of growth counts. Add this increase to the other increases in the 30+ stocks we own and you are talking about a good amount of extra income.
This increase is simply a reminder that our dividend portfolio is constantly growing every single day … without any extra work from us.
Dividend Growth for INTC
We have owned shares of INTC for almost 6 years now … making it one of the first dividend growth stocks we invested in.
Overall, the company has shown the ability to maintain it’s dividend, but without consistent annual growth. Despite that, the company still has managed to put up decent dividend growth rates.
Take a look at the annual dividend payments since 2011 –
- 2011 – $0.782
- 2012 – $0.870
- 2013 – $0.900
- 2014 – $0.900
- 2015 – $0.960
- 2016 – $1.040
- 2017 – $1.079 (projected)
Note – The 2017 dividend has been adjusted to reflect a dividend increase after the first quarter.
As you can tell from the numbers above, INTC dividends have been raised consistently over the past several years … except in 2014.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher.
Intel doesn’t meet the 6% threshold for the 5 year DGR. However, over the last 3 years, the company has managed to keep above that 6% threshold that we look for in a dividend stock.
Here are a few average growth rates for shares of Intel –
- 1 Year DGR – 3.75% (2016 to 2017)
- 3 Year DGR – 6.25% (2014 to 2017)
- 5 Year DGR – 4.44% (2012 to 2017)
- 6 Year DGR – 5.58% (2011 to 2017)
Note – We included the 6 Year DGR since that shows the growth rate since we originally purchased shares of this stock.
As you can see from the dividend growth averages above … the company has been increasing their dividend at a consistent rate for the past 6 years. Although there was no increase in 2013 to 2014.
Because we have been holding our shares for 6 years now, we are earning a healthy yield on cost of 4.44%. That is still a great return on our investment … despite the company not raising their dividend in 2014.
INTC – Buy, Sell, or Hold?
Back in August 2011, we purchased 12 shares of Intel for $20.56 per share.
We continued to buy shares in the company through our LOYAL3 account, up until they froze their dividend in 2014. These investments ranged from $50 a month to $150 … which slowly built up our position in INTC. This slow but effective strategy of building up shares in a company one month at a time has resulted in a sustainable income stream of $50+ per year that will continue to grow … on it’s own.
At the time of this writing, Intel only accounts for a small percentage of the Money Sprout Index. It currently makes up 2.0% of our overall portfolio. Over time, I expect our assets to slowly grow in this dividend stock through dividend reinvestment and annual dividend increases.
Since our first purchase in the company, we have earned $152.20 in dividends from INTC.
Here are a few stats from owning stock in Intel for the past 5+ years –
- Total Investment – $1,175.69
- Shares Purchased – 46.000
- Dividends Earned – $152.20
- DRiP Shares – 1.933
To date, we have earned back 12.95% of our original investment in dividends! Despite no dividend increase in 2014, this is still a healthy return. Some dividend investors may choose to sell a stock when a company freezes it’s dividend. However, I don’t always agree with this strategy. As long as a company is able to maintain their dividend and the payout ratio remains below 60% … we prefer to hold onto our shares.
I think this is a great example of buy and hold for the long term. It doesn’t always work out to sell a stock, just because they don’t raise their dividend every year.
What a cool feeling it is to earn back almost 13% of our original investment just in dividends on a stock that we don’t really pay that much attention to. And of course, all of those dividends over the years have been reinvested back into more shares of INTC stock to help accelerate our income. This helps make up for the lack of dividend increase in 2014.
At the time of this writing, INTC does meet our stock screen criteria based on the following metrics –
- Current Yield – 3.11%
- Payout Ratio – 45.02%
- P/E Ratio – 15.25
The company has a payout ratio well below 60% which is great. In addition, the P/E ratio is much lower than the 20 threshold we look for at 15.25.
The company also has a competitive current yield of 3.11%. Those are hard to find in a market like we are seeing now.
Despite these positive metrics for INTC, we have the company as a HOLD for our portfolio.
While INTC has been a piece of our dividend income foundation … there are better opportunities at this time. The dividend freeze in 2014 took them off of the Dividend Contender’s list that we look at. If the company can manage to increase their dividend at a decent growth rate over the next 2 years … then they may get put back on the Dividend Challenger’s list.
If the metrics still look attractive, we may consider putting them on our “watch list” and invest new dollars. In the meantime, we will put our new money in more attractive companies.
We will also continue to hold our existing shares in Intel and reinvest dividends each quarter to continue the slow growth. If at any time, the company were to cut their dividend, then we would sell our shares in the company.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – INTC. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.