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 (NASDAQ:INTC) in which I bought shares a few months ago. So I’m obviously going to tell you how great the company is and why I bought them.
INTC Company Profile
If you have a computer, chances are that there is an “Intel Inside”. Intel is the largest designer, manufacturer and seller of “computer chips” in the world. Its microprocessors are well known and reliable. Its biggest competitor is definitely Advanced Micro Devices (NASDAQ:AMD). But while AMD was knocking on Intel’s door a few years ago, Intel signed some important partnerships with computer builders to ensure its leader status in the microprocessor market.
Along with its microprocessors, Intel 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
|Current Dividend Yield||3,02|
|5 year Dividend Growth||13,95|
|1 year Dividend Growth||19,17|
|Sales Growth (1 year)||24,19|
|Sales Growth (5 year)||11,49|
|Return on Equity||25,16|
|Debt to Capital Ratio||0,02|
INTC Dangers & Opportunities
I guess the good news is that Intel is a fairly stable technology stock when compared to many other companies in this sector. Because of its size and the fact that everybody needs a computer, Intel's 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 its geniuses with the resources they need. However, it’s not always a great success. For example, Intel also entered the smartphone and tablet markets but with less success than with personal computers and laptops. Over time, this could be a problem.
Intel's biggest competitive advantage is definitely its ability to spend more than anybody in the market when it comes to R&D. Since technology stocks are defined by their ability to evolve over time (we have two great, opposite examples with Apple (NASDAQ:AAPL) and RIM (RIMM)), Intel should do well in the next decade. As long as it spends its money in the right places.
Final Thoughts on INTC
If you look at a long term graph of the stock (see below)
Click to enlarge:
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 could count on for this period was its dividend. So at first glance, you might think that buying Intel 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), its dividend payout ratio (under 30%) and obvious dividend increase policy by current management, Intel is showing some interesting attributes that would make it a logical part of 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.