Intel (INTC) is the dominant force in a large computer processor market and it has roughly four fifths market share in the microprocessor segment. On Friday it bounced off a six month low and looks set to continue growing over the coming weeks.
Why buy Intel?
- In 2011, it doubled capital expenditures to $10.7 billion. To put this in perspective, Advanced Micro Devices (AMD), its most dangerous competitor, spent less than 1/40th of this amount. This will allow Intel to retain its cutting edge technological advantage and stay far ahead of its competitors.
- Intel's Atom processors will allowed Intel to cut into AMD's control of the smartphone processor market. The Atom has Intel's higher processor performance with power efficiency which is something Intel has struggled to achieve up till now. Consequently, over the next year, Intel should become much more competitive in both the smartphone and the tablet markets.
- Microsoft's (MSFT) new operating system, Windows 8, will result in a new generation of tablets which can compete with Apple (AAPL) on a level basis. The new Windows 8 tablets have Intel's Atom processors in them, so consequently, Intel already has a guaranteed position in the tablet market. Its processors will also be used in many handsets which use the Android operating system such as the new Motorola handsets (Motorola is now owned by Google (GOOG).
- Intel has a TTM Price/Earnings Ratio of 9.6, compared to an industry average of 17.4 even though its revenue growth is just higher than the industry average, and its operating and net margins are well above the industry average.
- The company also pays a quarterly dividend which has a projected annual yield of 3.97%. It has increased this dividend consistently since 2002 and looks set to continue providing higher returns to its shareholders.
Therefore, Intel at $22.68 per share is a great option for both dividend and growth investors. It has many long term advantages over its much smaller competitors and has a strong management team in place to continue its dominance of the rapidly growing processor market.
All my data is from morningstar.com and google.com/finance.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in INTC over the next 72 hours.