Forgo The Risk Of Intel For The Same High Yield Of Dow Chemical

| About: Intel Corporation (INTC)
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Oh Intel (NASDAQ:INTC), of all the stocks I follow, you cause me the most woe!

That may seem a bit dramatic now (especially since I don't even own shares of Intel), but it will be explained. In addition, I'll present an alternate investment option: Dow Chemical (DOW). If you think the only thing they have in common is their dividend yield, well, you're right. Don't worry, keep reading and it will make sense.

For those who haven't been intently following my investing foibles, I recently sold my Intel shares for various reasons, which I explained in this article (the usual: the perceived death of the PC, no entry into the mobile sector, etc.).

Since that was published, nothing has happened which would cause me to change my feelings about the company. In fact, the price of shares has continued to drop, no doubt a result of continued economic woes, and possibly some good news about their mobile competitors, ARM Holdings (NASDAQ:ARMH) and Qualcomm (NASDAQ:QCOM).

So if I don't own shares, why am I feeling this woe? It's pretty simple. The price and dividend yield are just too good and I've found myself torn over whether I should buy it back. This article highlights some of the same points I made in my previous article, yet draws a different conclusion by looking at the financials. That being the case, even if the PC dies a slow and painful death, Intel has lots of money so they can pay their dividend for some time. This seems ridiculous to me, immediately bringing to mind the analogy of hopping on board the sinking Titanic. Once it's certain that the Titanic (or Intel) is truly sinking, it might already be too late.

Unfortunately, it seems like more than a few people are looking at the dividend and low stock price, while only making a brief note of the troubled waters. Being attracted to this high dividend, I find myself constantly having an internal struggle over whether to grab up this value play before it's gone, or look for safer waters.

So what's a poor ol' engineer to do? The answer to this wasn't too hard to find. I just needed to look in my portfolio to see that I already own a company with a similar dividend, but without the predictions of impending doom.

Note to future commenters whose sole purpose reading this is to tell me why I'm wrong: whether or not it's a correct prediction, I'm just stating what it is. Enough people are having the same feeling towards Intel that it's hard to ignore. Until someone shows rising PC sales, there's a lot of risk carrying the dividend to its high position, and I don't like risk if I can avoid it.

Back to that alternate company: Dow Chemical. It matches Intel's 4.49% yield with a 4.59% yield of its own. Like Intel, it got to that high yield by riding along the beaten path. Since its year-to-date high of $36.08/share, it's dropped 29% to its current price of $27.89/share. The afflictions plaguing Dow Chemical however, are of a completely different nature than those plaguing Intel, and they're ones I have no problem holding on through if I'm committing to getting this dividend.

While I compared Intel to the sinking Titanic, a more appropriate analogy for DOW would be a ship navigating the Arctic. When the season's right, the ice can be broken, creating a path for great profits. When the Arctic freezes back up, that ship has to take the long route, slowing down those returns. That is the nature of Dow Chemical, a cyclical company. Unfortunately the price woes for shareholders is directly linked to the poor global economy. The company sells directly to manufacturers, so when manufacturing slows down, so do the profits.

There's been lots of bad news, like poor sales figures, lowered earnings predictions, layoffs, etc., but no one is screaming about the death of chemical manufacturing. Instead, if you can deal with the constant pain of collecting a great dividend while the earnings are a little low, you'll be rewarded. It's expected that when the economy recovers, so will the stock price. That's not to say that the same thing can happen with Intel, but that carries a much higher risk. With Dow, you know that it will bounce back (just not when). There's no way of knowing the same for Intel.

So there's my recommendation. Don't confuse it with "sell Intel and buy Dow". Rather, if you find yourself attracted to the share price and high yield of Intel, but are very uncertain about the company's future, Dow Chemical is great alternative, with the same yield but with what I think is considerably less risk.

Tell me what you think below! I know I'll have more than a few people who disagree, so keep it civil and back up your statements. Who knows, maybe you'll change my mind, forcing me to write a counter-article to this one.

Disclosure: I am long DOW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.