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.
Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.