Forget about Intel, there are other dividend stocks out there that pay better! That’s what many analysts are saying. Just like IBM, Intel has been tanking as of late (although, IBM is on the rise again), as the demand for PCs wanes. Having not seen a dividend in two years, a small boost of 6.7% came at the beginning of 2015, followed by a marginal increase to 8.3% at the beginning of 2016. But the PC market isn’t what it used to be and the struggle is having a serious impact on Intel. If you’re looking for a higher dividend, check out Qualcomm (QCOM) and Cisco (CSCO), both better contenders.
Qualcomm stock is yielding an impressive 4.2%, and will likely see an increased dividend by then end of the month. Let’s be real – Qualcomm has faced some fairly significant challenges, with a lag in free cash flow in fiscal 2015. And it is possible 2016 might bring more of the same, but in spite of Qualcomm suffering loss in the licensing segment, the loss wasn’t even close to the losses suffered by Intel. And thanks to owing critical patents that relate to mobile networking tech, a majority of pre-tax earnings is derived from this segment.
And with a 4.2% dividend, Qualcomm comes out nearly a full percentage point higher than Intel, thanks much in part to the fact that Qualcomm relies more heavily on the licensing segment, vs. Intel leaning on the PC market.
We all know Cisco as the leader when it comes to enterprise routing and switching markets. And while Cisco isn’t PC dependent like Intel, the company has faced challenges in the face of rising cloud computing providers. Some of said providers are starting to design and implement their own data center hardware configurations. This includes switches, which leaves OEMs like Cisco out in the cold.
The good news is, while these smaller cloud-based companies are taking matters into their own hands, Cisco has continued to not only be a recognized leader in the industry, but there’s been a huge shift from a company that provides hardware, to a company that provides solutions. As CEO John Chambers has said, Cisco aims to be the number one IT company in the world.
That said, the Cisco data center business is predicted to grow between 20 – 25 percent of the annual rate over the next few years. Between software and services, the company is expected to post an annual growth of between 4 – 7 percent.
While the current dividend sits at 3.75% after a substantial increase in the beginning of the year, there’s lots of room for a payout ratio expansion. This means dividend growth moving forward will be somewhat faster.
Combine high yield with lots of room for growth, and Cisco is an excellent choice.