(By Mani) Chip giant Intel Corp. (NASDAQ:INTC) announced a 7 percent increase to its quarterly cash dividend to 22.5 cents per share, beginning with the dividend that will be declared in the third quarter of 2012.
Intel, which has increased its dividend for the third time in the past 18 months, has upped its dividend every year over the past decade and was recently recognized as Dividend Channel's "Top Dividend Stock of the Nasdaq 100."
The latest dividend hike represents a yield of 3.2 percent, while the company's five-year average dividend yield stands at 2.80 percent.
Intel, which has been paying dividends since 1992, pays 35 percent of its earnings as dividends, implying that there is more upside to its payout ratios. The company's 5-year average dividend payout ratio is 46 percent.
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The dividend yield of Intel compares favorably to the return from investment in bonds issued by the U.S. Treasury and certain classes of municipal and corporate bonds.
The 5-year, 10-year and 30-year treasury bonds offers yield of 0.78 percent, 1.88 percent and 3.06 percent, respectively.
Triple-A rated municipal bonds provides yield of 0.75 percent, 1.47 percent, 2.75 percent for 5,10 and 20 year periods, respectively. In addition, AAA-rated corporate bonds offer returns of 1.62 percent for 5 years, 3.64 percent for 10 years and 4.92 percent for 20 years.
The company's price-to-earnings ratio of 12 percent is lower than industry's 55 percent, and its debt-to-equity ratio stands at 16 percent, compared to industry average of 1 percent.
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California-based Intel has delivered returns of 22.30 percent in the last one year and delivered 80.15 percent on investment in the last three years and 41.85 percent in the last 5 years.
Meanwhile, the hike in dividend comes despite Intel reporting lower first-quarter profit on flat sales. For the first-quarter, Intel reported net income of $2.74 billion or 53 cents per share, down from $3.16 billion or 56 cents per share last year. Revenues were almost flat at $12.9 billion.
However, CEO Paul Otellini expressed confidence that Intel would deliver consistent returns to shareholders in 2012.
"2012 is expected to be another year of record revenues for Intel, with strong demand in our core business and significant progress in smartphones and other new growth areas," said Paul Otellini, Intel president and CEO. "This latest dividend increase is one more example of our commitment to return cash to our stockholders as we continue to generate strong cash flow fueled by the global growth of computing."
Taken together since their inception, Intel has returned about $112 billion to shareholders in the form of dividends and stock buyback programs.