Monday felt like a day of purging for the major stock market averages, with the S&P 500 closing down 2.3% to finish slightly above the technical support level of 1552. The world's investors are poised at the edge of their seats wondering what will happen today, especially after gold's price fell another 9.3% Monday (see my most recent article about "The Wacky World of Gold and Silver").
The bloodbath in the investment markets was partially blamed on slowing economic growth in China. Many solid, low PE ratio dividend-paying stocks like Eaton (ETN) fell sharply. ETN closed the day down over 5% to $57.22.
Yet, the stalwarts of the old-school technology titans who pay generous dividends didn't budge much at all. Microsoft (MSFT) closed down 10 cents tp $28.69 Monday on higher than normal volume. MSFT's dividend yield-to-price is nearly 3.21% and it reports earnings on Thursday.It's hard to disagree with our own Jim Cramer on the topic of whether a China slowdown is a threat to big tech companies. "Take your pick, but tech isn't as dangerous as it would seem because of China, it's just dangerous because we are about to get earnings," Cramer said Monday.
Perhaps that's INTC shares moved 1.36% lower on lower than average volume. Closing at $21.38 lifted INTC's yield-to-price to an amazing 4.2%. Those who follow INTC know management has been committed to keeping the dividend yield at high levels. The conundrum the company faces is that over the past 10 years the dividend has grown close to a 30%-per-year clip. That slowed way down last year, but at the current 90 cents per year payout this has pushed the payout ratio to around 41% of net income. Analysts are expecting, on average, a 22.6% decrease in INTC earnings-per-share (EPS) to around 41 cents. Without an announced increase in the dividend payout it will stretch the payout ratio closer to 50% or higher. Sales growth and revenue for the first quarter of 2013 is also expected to be down an average of around 2.3%. A closer look at the one-year chart below reveals how the price-per-share is impacted by both the diluted quarterly year-over-year EPS and the trailing 12-month quarterly per-share revenue numbers. INTC data by YCharts