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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Chris Forte who wrote (3796)	2/15/2010 9:33:19 AM
From: chowder	Respond to of 34328

finance.yahoo.com

To: Chris Forte who wrote (3796)	2/15/2010 9:53:54 AM
From: chowder	Read Replies (1) \| Respond to 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.

To: Chris Forte who wrote (3796)	2/15/2010 12:08:40 PM
From: Steve Felix	Read Replies (2) \| Respond to of 34328

You asked for pro's but I'll chime in anyway. :) The only thing I don't like about INTC is that it is a highly cyclical business. At times this could play in your favor. They (and ADP also) are sitting on a lot of cash, something others look at as a minus, but I see as covering the dividend in case of a hiccup or two. Here are the IFs: If analysts are right, for 2010 INTC will earn $1.67, ADP $2.34. Last raise for ADP was .01 per quarter or 3.03%. A similar raise of .01 per quarter for ADP will give .35 per quarter 1.40 per year. 2.94% increase. $1.40 divided by $2.34 earnings = 59.8% payout ratio going forward. Last raise for INTC was .018 per quarter or 12.8%. A similar raise or .018 per quarter for INTC will give .176 per quarter .704 per year. 11.3% increase. $.704 divided by $1.67 earnings = 42% payout ratio going forward. If both stocks hit S+P evaluations on 2010 earnings ADP will be up 5.9%, INTC 22%. People will look at different things: Trailing PE ADP 15.08 INTC 26.40 Forward PE ADP 16.04 INTC 11.41 PEG Ratio ADP 1.59 INTC 1.06 Price to sales ADP 2.36 INTC 3.15 Price to book ADP 3.57 INTC 2.66 Given a choice at this moment I would go with INTC, knowing I would have to keep more of an eye on it than the much more level earning ADP. I'm sure others see it differently.