We recently published a list of 10 Best Innovative Stocks that Pay Dividends. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against the other best innovative stocks that pay dividends.
Innovation plays a crucial role in today’s market. With the significant attention tech stocks have gained over the past year, it’s clear where investors are directing their funds. Tech firms are leveraging disruptive technologies like artificial intelligence to process vast, complex datasets. In the healthcare sector, advancements in research and development (R&D) have led to life-saving drug therapies and treatments. Meanwhile, the growing impact of climate change is pushing energy and utility companies to prioritize renewable energy sources. Therefore, innovation lies at the heart of every industry today.
Businesses in the US and globally swiftly recognized the influence of innovation on their growth and operations, and they are gradually shaping their activities around it. A recent McKinsey survey of over 1,000 executives revealed that companies with a strong culture of innovation are twice as successful as some of their peers in scaling digital transformations. These innovative firms focus on technologies and changes to their operating models that promote rapid learning and adaptation—essential components of innovation. The report also highlighted that 14 of the top 20 global companies have leveraged innovation to either expand existing markets or create entirely new ones.
Read also: Top 18 Automotive Industry Innovations and Trends
A key component of innovation is R&D, which focuses on systematic and scientific investigation to create new products, technologies, or processes. Through R&D investments, companies can strengthen their abilities, explore fresh ideas, and discover innovative solutions to address customer demands. Businesses worldwide, particularly in the pharmaceutical sector, have boosted their R&D investments to develop new products that meet the demands of their customers. Financial Times reported that R&D in the US has grown in recent decades, increasing from 2.2% of GDP in the 1980s to 3.4% in 2021. This rise is mainly due to the private sector’s contribution, which doubled to 2.5% of GDP. Moreover, the percentage of the population involved in patent creation almost doubled during this time.
It’s not just established companies that are embracing innovation in their operations; the rise of US startups also reflects this trend, as they introduce groundbreaking business ideas previously unheard of. Economist John Haltiwanger found that Americans were starting new businesses at an unprecedented rate. And he’s not mistaken. In 2020, more new businesses were launched than in any previous year, with 2021 following closely behind. According to the Kauffman Indicators of Entrepreneurship, the one-year survival rate for these startups exceeded 80% in 2021, marking the highest rate since 1999. Haltiwanger noted that a surge in new businesses is a strong indicator of job creation, innovation, and productivity growth within the economy. He further said that startup booms not only reflect technological innovation but also significantly drive it. Startups explore how to leverage new technologies, experiment with them, and create new products, pushing competitors to adapt and innovate in response. Research from Texas McCombs, which examined 6,116 patents from the mid-1970s to 2016, highlighted the impact of startups on innovation. The study found that patents from startups were cited 8.5% more each year and 21% more over a nine-year period compared to patents from established companies.
Our Methodology:
For this article, we scanned Insider Monkey’s database of 912 hedge funds as of Q2 2024 and picked companies that actively prioritize and promote the development of new and groundbreaking ideas, products, services, or business processes. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them. These companies belong to different sectors, including healthcare, technology, aerospace, and defense.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) is a California-based company that manufactures and designs computer components and semiconductors. The company is well-known for its pioneering achievements in microprocessor technology. In 1971, it developed the Intel 4004, the first commercially successful microprocessor. This innovation transformed computing by combining the functions of numerous transistors into a single chip, leading to smaller, faster, and more powerful computers.
Intel Corporation (NASDAQ:INTC) has had a tough 2024 as the stock fell significantly by over 55% since the start of 2024. Moreover, the company reported mixed earnings for the second quarter of 2024. Its revenue came in at $12.8 billion, down 1% from the same period last year. The revenue also missed analysts’ consensus by $148 million. This performance was disappointing, despite achieving significant milestones in product and process technology. Results were affected by challenges with gross margins due to the rapid increase in AI PC product production, higher-than-usual charges from non-core businesses, and the effects of unused capacity. This was also highlighted by Invesco Distributors, Inc. in its Q2 2024 investor letter:
“Stock selection in the industrials and health care sectors detracted from relative performance during the quarter. Selection and an underweight in consumer staples also hurt relative return as the sector was one of just two index sectors with a positive return for the quarter.
Intel Corporation (NASDAQ:INTC): Shares declined after the semiconductor company reduced its second quarter revenue and earnings guidance. Investors also appeared concerned about the future of its foundry business and lack of AI market share gains.”
That said, by implementing spending reductions, Intel Corporation (NASDAQ:INTC) is proactively working to enhance its profitability and strengthen its balance sheet. These measures are expected to significantly improve liquidity and lower the debt balance while allowing for strategic investments that will create long-term value for shareholders. Currently, the company’s cash position provides some relief for investors. It ended the quarter with $11.3 billion available in cash and cash equivalents, up from $7 billion six months ago.
In addition, Intel Corporation (NASDAQ:INTC) generated $2.3 billion in operating cash flow during Q2 2024, which was sufficient to cover its dividend payments worth $0.5 billion. The company pays a quarterly dividend of $0.125 per share for a dividend yield of 2.35%, as of September 18. It is among the best innovative stocks that pay dividends.
Intel Corporation (NASDAQ:INTC) was a part of 75 hedge fund portfolios at the end of Q2 2024, compared with 77 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a total of nearly $2 billion.
Overall, INTC ranks 4th on our list of best innovative stocks that pay dividends. While we acknowledge the potential for INTC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.