Don’t Rule Out Intel Corporation (INTC) Just Yet: ARM Holdings plc (ADR) (ARMH), Texas Instruments Incorporated (TXN)

Dividend & payout

In terms of dividend, Intel is offering a much higher dividend yield than its major competitors: the company pays a $0.225 quarterly dividend, which comes to 4.16% annual yield. In comparison, Texas Instruments Incorporated (NASDAQ:TXN) pays $0.28 per share, which comes to 3.17% annual yield; ARM Holdings plc (ADR) (NASDAQ:ARMH) only offers a $0.13 dividend, which comes to a 0.51% yearly divided yield. Intel Corporation (NASDAQ:INTC), much like Texas Instruments, increased its payout ratio in 2012. Intel is also in the middle of the pack on this ratio (see chart below).

Finally, both Intel and Texas Instruments are buying back their respective shares. These factors mean that investors of these companies are getting back their investment faster than ARM investors do.

Rise in R&D

In terms of R&D Intel expanded this provision by more than 21% during last year. Its competitors have also augmented their R&D provision during 2012: Texas Instruments Incorporated (NASDAQ:TXN) by more than 9% and ARM Holdings plc (ADR) (NASDAQ:ARMH) by only 4%. On the other hand, Intel Corporation (NASDAQ:INTC) was in the middle of the pack in terms of R&D as percentage of revenue at 19% in 2012. The chart below shows the developments of this ratio in recent years and a comparison to other chip companies.

Thus, Intel still has a long way to go until it will reach the same level as ARM Holdings in terms of R&D as percentage of revenue.

In 2013 Intel projects its R&D and G&A will reach around $18.9 billion – this represents almost 4% gain compared to 2012. Assuming the company’s ratio of R&D to G&A will remain in 2013 as in 2012; the R&D provision will rise by 4% and could reach $10.5 billion during the year. If the company will keep raising its R&D budget this could eventually lead to new products and growth in revenue.

The Foolish bottom line

Despite the slow year Intel Corporation (NASDAQ:INTC) just had, it still has the capabilities to produce not only growth but also a high profit margin. The company’s rise in R&D could eventually lead to a rise in this company’s revenue in the near future, which will put it back on track. In the meantime, the company is continuing to share the profits with its investors by its buyback program, high yield, and high payout ratio.

The article Don’t Rule Out Intel Just Yet originally appeared on Fool.com and is written by Lior Cohen.

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