Time To Dump Intel From The Ultimate Sustainable Dividend Portfolio?

Aug. 7.13 | About: Intel Corporation (INTC)

One of the most important -- if not the most important -- projects that I write about on this blog is my passive income journey where I try to build passive income streams that can then help me become financially independent. As most of you know, the Ultimate Sustainable Dividend Portfolio (NYSE:USDP) is a core part of that strategy, and it is built mostly around strong long-term growth. So far, none of the holdings have ever decreased their dividend. While I know that will happen at some point, I'm hoping to get rid of those names before that happens.

Naturally, I try to stay informed as much as possible, and I'm currently very concerned about one of my holdings -- Intel (NASDAQ:INTC). Why? If you remember, I try to hold names that respect the 7-7-7 rule -- that is, 7% of average growth in the past five years for sales, earnings, and dividends. Intel is doing very poorly in each of these metrics. I bought Intel for a variety of reasons, but with it being a tech stock, I expected growth to remain strong -- which has not been the case. Let's take a look at a few key charts:

INTC Dividend Chart

INTC Revenue Quarterly Chart

INTC EPS Diluted Quarterly Chart

You can also see the numbers. Things have not been going very well. Why? A variety of reasons -- such as competition, tougher economic times, etc. The bigger worry, though, is the fact that Intel is on the bad side of a very strong trend. Intel builds chips that power many things, but mainly PCs. The strong growth in Macs and the surge of mobile devices and tablets where Intel is much weaker is a very worrying sign and, unsurprisingly, it has struggled to keep up.

Let's look at the main numbers:

Click to enlarge image.

Click to enlarge

Intel did end up not raising its dividend, and it's unclear when the next raise will come. To be clear, I don't expect that dividend to decrease anytime soon. The company has little debt, is still making much more than it's paying, etc. But I want to get out before such questions start becoming a serious concern. I remain undecided, but I'll try to get to some decision before the next USDP update.

One issue that I would encounter if I do remove INTC is that there are very few other tech stocks that would be a good fit to replace it. There is also a bit of downside risk in terms of overall yield. INTC pays an almost 4% dividend, mostly because the stock has performed so badly. At the growth levels I'm looking for, it's almost impossible I'd find a name that offers a 4% yield. However, a small drop would be worth it over the longer term, of course.