One of the two dividend stocks I'd buy right now, Intel (NASDAQ:INTC), is a no-brainer. Its transformation into a provider of components for the Internet of Things (IoT) and cloud data centers, as well as a comprehensive suite of memory solutions, is gathering momentum. Not to mention, its 2.5% yield is nothing to sneeze at.
The other dividend stock I'd buy right now, though, might surprise you. The questions swirling around Qualcomm (NASDAQ:QCOM) are many. Will it ever close its $47 billion deal to buy IoT leader NXP Semiconductors (NASDAQ:NXPI)? Will its own suitor, Broadcom (NASDAQ:AVGO), succeed in acquiring it? How will the outstanding lawsuits filed against it by the likes of Apple and others play out?
Thing is, no matter how those various scenarios resolve, Qualcomm, its 3.5% dividend yield, and its shareholders will almost certainly end up the better for it.
Bring on 2018!
Intel's third quarter was a microcosm of its 2017. It overcame the headwind of a so-so PC market, and made strides in its transition efforts, resulted in a stellar quarter with more record-breaking results. Better still, it has become evident that CEO Brian Krzanich's goal of turning Intel into a "data center first" provider is bearing fruit.
There was a time that flat PC sales would have spelled disaster for Intel: Those days are gone. Last quarter, client computing unit revenue (the segment under which Intel reports PC chip sales) was flat year over year at $8.9 billion. Yet Intel was still able to report a 6% jump in total revenue to $16.1 billion along with record-breaking operating revenue and earnings per share (EPS). Who needs PC sales growth?
Data center revenue rose 7% to $4.9 billion in Q3. The IoT group generated $849 million last quarter, up 23% compared to a year ago. And sales from the memory solutions group soared 37% to $891 million, pushing it past IoT as the third-largest unit as measured by revenue.
Finally, sales in programmable solutions -- which is closely tied to Intel's automotive and other IoT efforts -- were up 10% to $469 million. As it stands, $7.1 billion of Intel's total revenue -- 44% -- is now derived from areas unrelated to PCs. And thanks to Krzanich's cost management initiative, its top-line growth is padding its profitability.
Intel shaved 10.5% off its operating expenses, which helped boost operating income 15% to $5.1 billion, and EPS skyrocketed 36% to $0.94 a share in Q3. This is a company that's just now hitting its stride. It's poised for a breakout year, and shareholders will enjoy a tidy payout along the way.
All signs point to yes
Uncertainty can be an investor's worst nightmare. That said, the questions plaguing Qualcomm will almost certainly be answered in ways that turn out to be positive for its shareholders. Let's take a look at the Apple scenario first. Apple alleges that Qualcomm's licensing fees are anti-competitive, so it's withholding those payments to its suppliers, which in turn are not paying their fees to Qualcomm.
Qualcomm had a similar disagreement with Chinese regulators three years ago. Eventually, the company wrote the government in Beijing a $975 million check, and now counts the China market as a core driver of growth. It has already settled similar disputes with South Korea, Taiwan, and BlackBerry. Despite the settlements and legal issues, total sales declined a mere 3% last quarter to $6 billion -- though Qualcomm's high-margin licensing revenue took it on the chin, sinking 16% to $6.45 billion last fiscal year.
What about the NXP deal? Bringing NXP in-house would turbocharge Qualcomm's IoT initiatives, to be sure. However, it's making headway on its own, as it demonstrated recently at the Consumer Electronics Show (CES) in Las Vegas.
In addition to $3 billion worth of non-smartphone orders on the books, Qualcomm announced it has $3 billion in IoT automotive-related sales pending. Its push into 5G is also gathering steam, and its giving its prospective suitor, Broadcom, a run for its money in both Wi-Fi chips and smartphone parts.
Even if Broadcom wins over shareholders, any successful bid for Qualcomm will almost certainly be for more than the already-rejected $105 billion offer. The end result for investors would be a relatively quick gain to be reaped, but in the meantime, they could enjoy Qualcomm's industry-leading 3.5% dividend yield. Bottom line: No matter how the outstanding questions are resolved, expect Qualcomm shareholders to end up the better for it.