Round two: stability
Paying dividends is well and good, but how long have our two companies been increasing their dividends? The same dividend payout year after year can quickly fall behind a rising market, and there’s no better sign of a company’s financial stability than a rising payout in a weak market (so long as it’s sustainable, of course). Intel Corporation (NASDAQ:INTC) did not raise its dividend from 2009 to 2010, but that’s still a three-year streak of increases, which is a year longer than Cisco has been paying dividends, period.
Round three: power
It’s not that hard to commit to paying back shareholders, but are these payments enticing or merely token? Let’s take a look at how both companies have maintained their dividend yields over time as their businesses and share prices grow. We’ll be fair to Cisco Systems, Inc. (NASDAQ:CSCO) here and start comparing both stocks from the time the routing kingpin initiated its payouts:
INTC Dividend Yield data by YCharts.
Cisco might beat Intel’s hefty yield someday, but it’s not there yet.
Round four: strength
A stock’s yield can stay high without much effort if its share price doesn’t budge, so let’s take a look at the growth in payouts over the past five years. If you bought in several years ago and the company has grown its payout substantially, your real yield will likely look much better than what’s shown above. As before, we’ll begin tracking the changes from Cisco Systems, Inc. (NASDAQ:CSCO)’s first payout:
INTC Dividend data by YCharts.
Cisco is off to a roaring start on growing its payout, leaving Intel in the dust since 2011.
Round five: flexibility
A company needs to manage its cash wisely to ensure that there’s enough available for tough times. Paying out too much of free cash flow in dividends could be a warning sign that the dividend is at risk, particularly if business weakens. This next metric analyzes just how much of their free cash flows our two companies have paid out in dividends over the past four quarters:
INTC Cash Div. Payout Ratio TTM data by YCharts.
Intel Corporation (NASDAQ:INTC)’s payouts are quite high for a tech company. Cisco has a lot more room to grow from here.
Unfortunately for Cisco Systems, Inc. (NASDAQ:CSCO), a strong start and more wiggle room to boost payouts in the future can’t overcome Intel’s history or its superior yield. However, based on Cisco’s recent history, it might get even with (or pull ahead of) Intel before long.
The article Intel vs. Cisco: Which Dow Stock’s Dividend Dominates? originally appeared on Fool.com.
Fool contributor Alex Planes owns shares of Intel. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends Cisco Systems (NASDAQ:CSCO) and Intel. The Motley Fool owns shares of Intel.
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