Intel Takes Our Advice, Quits Whining and Boosts Dividend a Healthy 15%

Intel Takes Our Advice, Quits Whining and Boosts Dividend a Healthy 15%

You may remember that last September, we called out Intel’s management for whining about the company’s stagnant share price:

When a CEO constantly bemoans the fact that his/her stock price is wildly undervalued by Wall Street – why don’t they just jack up the dividend, and/or buy back stock hand over fist?

Intel’s Paul Otellini is constantly scratching his head about the lack of air under INTC’s price action – and he’s not alone by any means amongst corporate CEOs, but I’m going to single him out for this example.

Intel had been sitting on a nice pile of cash, while paying a very respectable 3.3% dividend.  Yet INTC has traded in the same range for much of the last decade – granted it was wildly overvalued when we started the decade, but the lack of stock appreciation has nonetheless been frustrating for Intel execs and employees alike.

So if you want to get investors’ attention – why not boost that dividend a healthy amount?  Or buy back your wildly undervalued stock hand over fist?

You can read the full piece here.

Today, I’m pleased to see that Otellini took our advice!

Intel Corp. announced Friday that it is raising its dividend by 15%, joining the ranks of other technology giants that have beefed up dividend activity.

Intel said the increase pushes its quarterly cash dividend up to 18 cents per share, or 72 cents per share on an annual basis.

“Our ongoing operational performance and confidence in our business going forward provide the ability to return more cash to shareholders,” Chief Executive Paul Otellini said, referring to 2010 as Intel’s “best year ever.”

The move boosts the chipmaker’s dividend yield to 3.4%, based on the company’s Thursday closing price of $21.21 per share. That exceeds the yields offered by bonds such as the 10-year note, which was at 2.7% on Friday.

Source: CNNMoney.com.

Well played, Otellini!  Bravo!

If you’re looking at Intel as a potential blue chip investment, you should check out our piece about Intel’s potential “next act” as the PC fades in importance over the coming 5-10 years.

There’s a lot of pessimism priced into INTC right now – if they can show some signs of crossing the chasm from PCs to tablets, it could be a real value at current prices.  In the meantime, a 3.4% yield is nothing to sneeze at in this low/no interest rate environment.

Intel stock price chart 2011Source: StockCharts.com

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