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Strategies & Market Trends : Dividend investing for retirement
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To: Chris Forte who wrote (3796)2/15/2010 9:53:54 AM
From: chowder  Read Replies (1) of 34328
 
Re: INTC ... INTC has a Payout Ratio of 73%. That's considered high for a non-MLP, non-REIT and non-Utility.

The higher the payout ratio, the less the odds of dividend increases down the road.

It is generally recommended that you keep the payout ratio under 60% and 60% by some is still considered high. A lot of people prefer under 50% except for the groups listed in the first paragraph.

The thinking is some of the cash needs to be used for research and development, acquisitions and other ways of generally growing the business.

I'm not saying they can't raise dividends, it just makes it more difficult to do other things with their cash and pay the dividend too.

ADP for example, is also a technology stock with a better dividend history and a lower payout ratio of 49%. It has raised dividends for 22 consecutive years.

I'm looking strictly from a view point of the safety of increasing dividends.

There are always howevers!

My however is ... the S&P 500 has a dividend yield of 2% on average according to Value Line. I'll take a higher payout ratio, with a risk of not raising the dividend annually, if the stock has a yield that is double that of the S&P 500. In other words, at least a 4% yield.
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