In the following, Motley Fool analyst Eric Bleeker discusses the possibility that Intel (Nasdaq: INTC) increases its dividend 50% and becomes a dividend monster.
Doing so wouldn't be unprecedented, as Cisco (NASDAQ: CSCO ) increased its dividend 75% in 2012. Oracle (NYSE: ORCL ) also made a bold move ahead of the fiscal cliff by moving up its next three quarterly dividend payments into 2012.
Intel's current dividend yield of 4.3% already surpasses that of Apple (NASDAQ: AAPL ) and Microsoft (NASDAQ: MSFT ) at 2% and 3.5%, respectively. Still, there is evidence to suggest the company could support a 6% dividend yield.
Intel has a rock-solid balance sheet with cash in excess of debt levels, but much of the cash is held overseas and would be subject to burdensome taxes if used as dividend payments. However, the company can continue to tap the debt markets as a source of cheap funding. Demand for high-quality corporate bonds, such as Intel, remains as robust as ever. The company recently issued $6 billion in debt, with the five-year maturity yielding just 1.35%.
So in what direction does the CEO want to take Intel? Does he want to muddle forward with so-so results from excessive capital expenditures? Or does he want to slow the mobile growth division where the company already lags behind, cut costs in the PC and server segments, and use opportunistic debt financing to become a dividend monster?
See more in the following video.
As Eric details, when it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Better yet, you'll continue to receive updates for an entire year. Click here now to learn more.