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Intel Corporation (NASDAQ:INTC): Intel Corporation is the largest semiconductor chip maker company in the world. Intel designs, and manufactures computing and communications components, such as microprocessors, chipsets, motherboards and wireless and wired connectivity products, as well as platforms that incorporate these components. Intel’s largest direct competitors that currently trade in stock markets include Advanced Micro Devices (NYSE:AMD), and Texas Instruments (NASDAQ:TXN). Here, is a 10 year income statement of Intel along with annual dividend payments.

Income Statement (in Millions)

Sales

Total Net Income

EPS

Dividends

2001

$26.539,00

$1.291,00

$0,19

$0,08

2002

$26.764,00

$3.117,00

$0,46

$0,08

2003

$30.141,00

$5.641,00

$0,85

$0,08

2004

$34.209,00

$7.516,00

$1,16

$0,16

2005

$38.826,00

$8.664,00

$1,40

$0,32

2006

$35.382,00

$5.044,00

$0,86

$0,40

2007

$38.334,00

$6.976,00

$1,18

$0,45

2008

$37.586,00

$5.292,00

$0,92

$0,55

2009

$35.127,00

$4.369,00

$0,77

$0,56

2010

$43.623,00

$11.464,00

$2,01

$0,63


When we look at the graph, we can clearly see that both revenues and total net income have been increasing since 2001. The only noticeable earnings reductions were observed in 2006 and 2009. Consequently, EPS also experienced a temporary set-back during those years. However, 2010 has been a great year, as total net income increased by almost 3-fold from the 2009 level.

Dividend Policy: Intel pays stable quarterly dividends each year. From 2001 to 2003, the quarterly dividend was $0.02, an annual payment of $0.08. Since 2003, dividends have been increasing year after year. 2010 quarterly dividend was $0.16 which is double the annual dividend in 2003. This year, quarterly dividends increased to $0.18, implying a current yield of 3.12%.

Balance Sheet (in Millions)

Current Assets

Current Liabilities

Long Term Debt

2001

$44.395,00

$8.565,00

$1.050,00

2002

$44.224,00

$8.756,00

$929,00

2003

$47.143,00

$9.297,00

$936,00

2004

$48.143,00

$9.564,00

$703,00

2005

$48.314,00

$12.132,00

$2.106,00

2006

$48.368,00

$11.616,00

$1.848,00

2007

$55.651,00

$12.889,00

$1.980,00

2008

$50.472,00

$10.926,00

$1.185,00

2009

$53.095,00

$11.391,00

$2.049,00

2010

$63.186,00

$13.756,00

$2.077,00

From 2001 to 2010, current assets increased from the value of $44.4 billion to $63.2 billion. Intel is expanding its business, as both current assets and current liabilities reached their peak values in 2010. There was a stable growth trend in balance sheet items during the last 10 years. In the years 2005, 2007, 2009 and 2010, the values of these three items rose together, and they also declined together in 2008. From 2004 to 2005, long-term debt almost tripled. However, given the level of current assets, Intel has only a negligible amount of long-term debt.

Historical Fundamentals

Avg P/E

Net Profit Margin (%)

2001

155,4

4,9

2002

50,5

11,6

2003

27,5

18,7

2004

22,3

22

2005

17,8

22,3

2006

23,2

14,3

2007

19,9

18,2

2008

21,8

14,1

2009

22

12,4

2010

10,3

26,3

By the start of techno-bubble collapse, average P/E was an extremely high value of 155.4, but shares lost one-third of their value in a year, and consequently P/E reduced to 50.5. However, that was not enough, and market corrected the P/E ratio to a stable value around 20 between 2003 and 2009. The spike in the earnings sharply slashed the P/E ratio to its historical low value of 10.3. This is a strong signal to dive in Intel, as the company is trading way below its historical ratios.

Direct Competitor Comparison

INTC

AMD

TXN

Market Cap:

125.46B

6.25B

41.87B

Employees:

82,500

11,100

28,412

Qtrly Rev Growth (yoy):

8.40%

N/A

17.30%

Revenue (ttm):

43.62B

6.49B

13.97B

Gross Margin (ttm):

65.31%

45.60%

53.65%

EBITDA (ttm):

20.23B

944.00M

5.32B

Operating Margin (ttm):

35.73%

8.64%

31.55%

Net Income (ttm):

11.46B

471.00M

3.18B

EPS (ttm):

2.01

0.64

2.62

P/E (ttm):

11.37

14.25

13.63

PEG (5 yr expected):

0.84

1.47

1.45

P/S (ttm):

2.87

0.96

2.98

Intel’s gross margin of 65.31% is greater than both of its direct competitors. Operating margin of 35.73% is also among the highest. The expected PEG ratio of 0.84 is lower than the norm of 1. Looking at AMD and Texas Instruments one can easily notice that Intel is priced below its competitors.

Intel has been seen a low-growth company, but for long term investors, it surely provides the necessary safety of margin. Intel has a top-notch product line in servers, solid state drives, and mobile equipment. The company has been steadily increasing its profits, but its shares are trading way below the 2001 peaks. Surely, the valuations at that time were crazy, but Intel has been punished enough for its participation in the techno-bubble. By looking at the fundamentals, one can confirm that Intel has a promising future. The stocks are trading with such low P/E and PEG ratios compared to competitors. It is time to forgive Intel for its past sins, and consider it among the dividend stock picks for the next five years.

Disclosure: I am long INTC.

Source: Intel: A Dividend Stock Pick for the Next Five Years