It’s been a while since I published my last dividend stock analysis. I got busy launching the Dividend Growth Index and beating the stock market with my dividend stocks. So today, I’ll be analyzing Intel (INTC) in which I bought shares a few months ago. So I’m obviously going to tell you how great the company is ;-). Just kidding, I’ll actually tell you why I bought them!
INTC Company Profile
If you have a computer, chances are that there is an “Intel Inside”. Intel (INTC) is the largest designer, manufacturer and seller of “computer chips” in the world. Their microprocessors are well known and reliable. Their biggest competitor is definitely AMD (Advanced Micro Devices). But while they were knocking on Intel’s door a few years ago, INTC signed some important partnerships with computer builders to ensure its leader status in the microprocessor market.
Along with its microprocessors, INTC is also involved in producing flash memory products, motherboards and connectivity products. Basically, take a look at your electronic devices at home and you’ll find some of Intel’s products!
INTC Dividend & Company Metrics
Name Intel Corp
Dividend Metrics Current Dividend Yield 3,02
5 year Dividend Growth 13,95
1 year Dividend Growth 19,17
Company Metrics Sales Growth (1 year) 24,19
Sales Growth (5 year) 11,49
P/E ratio 10,54
Margins growth 1,93
Payout ratio 30,56
Return on Equity 25,16
Debt to Capital Ratio 0,02
INTC Dangers & Opportunities
I guess the good news is that INTC is a fairly stable techno stock when compared to many other companies in this sector. Because of its size and the fact that everybody needs a computer, INTC first market (personal computer) is well protected (while not in a massive growth period!).
One of the key issues for Intel’s business is project evaluation. If the company doesn’t invest enough in R&D, its products quickly become obsolete. The good news is that Intel is sitting on a pile of cash and does not hesitate to provide their geniuses with the resources they need. However, it’s not always a great success. For example, INTC also entered the smartphone and tablet markets but with less success than with personal computers and laptops. Over time, this could be a problem.
INTC biggest competitive advantage is definitely its ability to spend more than anybody in the market when it comes to R&D. Since techno stocks are defined by their ability to evolve over time (we have 2 opposite great examples with Apple and RIM!), INTC should do well in the next decade… as long as they spend their money in the right places!
Final Thoughts on INTC
If you look at a long term graph of the stock (see below)
You’ll notice that the stock hasn’t produced any yield for a shareholder. In fact, the stock has lost 6% over the past 10 years. Therefore, the only thing you can count on for this period was its dividend. So at first glance, you might think that buying INTC is like buying a 3% bond (combined with a chance of losing a part of its value over 10 years!). However, considering its P/E ratio (10.54), it’s dividend payout ratio (under 30%) and obvious dividend increase policy by current management, INTC is showing some interesting attributes to be in any dividend portfolio. This is also why it is part of my picks for the Dividend Growth Index ;-).
Since I bought it, I made about 10% yield + a 4% dividend payout (based on the price I paid). However, I’ll be careful to see how the stock evolves over time and will follow its ability to gain market share in the tablet and smartphone industries.