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Buy Intel: 5.9% Shareholder Yield And Plenty Of Growth

Dec. 03, 2018 2:31 AM ETIntel Corporation (INTC)AMD, NVDA48 Comments
Okapi Research profile picture
Okapi Research


  • Intel is moving away from being PC-centric to being data-centric. As a result, Intel is benefiting from trends in datacenter growth, internet of things, and autonomous vehicles.
  • Over the past 3 years, Intel grew its revenue over 25%, EBIT over 57%, and EPS over 37%.
  • Intel has also rewarded shareholders with a 2.4% dividend yield and a 3.5% buyback yield which sums up to a 5.9% shareholder yield.

Intel’s Business Transformation

Intel (NASDAQ:INTC) is in the fourth year of a business transformation. Intel’s industry thesis is very cogent: the world of computing is moving away from being PC-centric to being data-centric. Furthermore, selling to datacenters is more than just powering servers, it involves powering the internet of things.

That may sound like a bunch of buzz words, but in practical terms this shift has catalyzed the company to make investments in markets like memory, programmable solutions, and autonomous vehicles while continuing to invest in the core PC and server chip business.

Intel’s strategy appears to be paying off. From 2015, when Intel announced its business transformation, to the last 12 months, revenue has grown over 25%, EBIT has grown over 57%, and Non-GAAP Diluted EPS has grown over 37%.

Shareholders don't have to wait to benefit from Intel's investments, they are paid to wait. The stock offers a 2.4% dividend yield and a 3.5% buyback yield which sums up to a 5.9% shareholder yield. This is quite attractive for a blue chip company that is able to grow both its top and bottom lines at double digit rates.

Intel’s PC Business has Stabilized

Over the past 10 years, the PC market has been soft. The market for PCs has matured and the rise of mobile computing has hurt PC demand. In 2015, Intel’s decision to embark on its ambitious turnaround was largely catalyzed by a weak PC market. However, after many years of decline, the PC market has stabilized and is poised to grow in 2018.

In the most recent quarter, Intel posted PC y/y revenue growth of 16%. This is quite impressive considering that PC shipments were only up low-single-digits. In fact, Intel has been able to consistently grow its PC segment at a much faster rate than the PC market. This

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Okapi Research profile picture
I share my thoughts on interesting companies I am investing in or have researched. I am agnostic to investing in growth, value, long, or short.

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Comments (48)

What is the 5.9% dividend yield? If I hold my 100 shares how am I getting a 5.9% yield?
PerpetualBull11 profile picture
Did you even read the bulletpoints that outline the article? The 3rd bulletpoint answers your question.
Mr Bull I did read it. But as a stockholder if I held my shares throughout the time period the only return I got was the dividend. The fact they did a buyback is a non sequitur since I held my shares. Plus the “5.9%” is also an illogical and meaningless number since the return to an investor is dividend plus or minus any change in share price during the ownership period. The 5.9% is flawed and irrelevant just like the rest of the piece. Caution may serve you well.
Mike Bruzzone profile picture
Latest Intel v AMD production assessment here:


Mike Bruzzone, Camp Marketing
Long Intel and have been selling puts whenever price drops to about 40-42. Puts have never been exercised at these prices and we collect a good premium.
climb mount niitaka profile picture
They are working fast to hire a new CEO— if we were on Pluto.
CarLoad profile picture
"Shareholder yield" is one of those concepts that sound great but never really translate to results.
I cashed out recently as ACTUAL yield has bottomed out indicating overvaluation.
I'll be happy to get back in if/when it's out of favor again to result in a decent dividend yield.
Dividend Income Investor profile picture
Shareholder Yield ? - Did the author seriously just make this term up ? It is a big , no huge stretch to call buybacks yields.

But we should be seeing a dividend raise soon for the real yield.
DeepThought43 profile picture
Re: Shareholder Yield ? - Did the author seriously just make this term up ?

No, it's a well known term. Mebane Faber even has a book "Shareholder Yield - A better approach to dividend investing". He contends that a lot of what one reads about dividend investing dates from back when tax laws were different and such. And Shareholder Yield is plainly based on *NET* shareholder buyback so all the squawking about new shares being issued is just lack of understanding the method - despite the author's obvious calculation which subtracted new shares from the buyback numbers.

One can argue whether this is a good method or not, but one should at least make an effort to understand it first.
Dividend Income Investor profile picture
Thanks, I have never heard the term before. (or Mebane Faber for that matter) .

I still cannot buy that share buybacks equates to a yield. But everyone has to follow their own paths. By the way - the term has not made it on Investopedia as of yet.
Sighcopath profile picture
Cell phones....INTC totally blew it on cell phones and has been trying to find a way to mitigate that massive blunder ever since. INTC transitioning into a "datacentric" company was about 6 years too late and done while looking out the back window rather than a forward looking move. INTC is supposed to have the best engineers working on the next level of innovation and can only seem to grow by making acquisitions? Where is the value and benefit from the yearly $15B+ R&D? 10nm is now 3 years late and that train may have jumped the tracks and never arrive. Perhaps INTC should move into the M&A business as that seems to be their major strategy. Disclaimer short INTC.
Not sure what alternate universe this is from but

• On mobile, Intel just won all of Apple's modem business from Qualcomm

• If Intel moving to datacenter a few years ago was "6 years too late," what would you call your stock AMD moving to datacenter NOW? (as Intel expands into other things, that AMD will try to jump into after Intel's planted a foothold and sucked money out of them).

• Intel isn't growing just by making acquisitions, it's also growing by outselling your stock AMD. For example, in Dec. 2017, Intel hoped to make $63 billion in revenue in 2018. But they were shocked by a CPU boom that raised this expectation to at least $71 billion (for now). People wanted more chips than expected and Intel took ALL of these customers, while your stock AMD's CEO Lisa Su gave interviews and sold her AMD stock.

• 10nm is not late at all. I would have been upset with Intel if they wasted money making a next-gen product when their current gen dominates AMD. That's the whole point of this article. Intel knows how to make MONEY.
@My Account --> "10nm is not late at all. I would have been upset with Intel if they wasted money making a next-gen product"

Come on...Yes Intel is years late on 10nm which it seems should you upset, because they did 'waste' (your word) money getting production ready for 10nm that they haven't been able to use yet. As a matter of fact they recently told us they were converting idle 10nm capacity back to 14nm to address their current capacity issues.

While I think Intel has dealt well with the lateness of 10nm, it certainly gives AMD an opening they never would have had if Intel wasn't years late with 10nm.
"because they did 'waste' (your word) money getting production ready for 10nm that they haven't been able to use yet."

Nope. The exact same machines are used for 10nm and 14nm. This is well known
Jake.the.realist profile picture
Buyback yields are misleading
@Jake Mezrahi

I agree, so I just checked. The share count has been dropping over the past four years or so, but slowly. There's an inherent dilution with the restricted stock awards (RSUs).
DGrainger profile picture
Those "hit and run" AMD snipers are up early today!
It's a hype stock. The problem is the pour souls who buy at inflated prices as a result of the hype and lose their money.

"It's a hype stock. "

EPYC is not hype. It is a clear and present danger to our dominance in the D/C.
It's hype because, even if EPYC does gain Lisa Su's hoped market share, AMD's EPS will be $0.75 at the end of 2019. The stock is selling for $23 today.
cemanuel profile picture
My INTC investment thesis is simple - will it resume being an innovative company or will it continue to lag behind its competitors? It's not in any trouble - balance sheet is in great shape and it continues to make money. But I've been waiting a while and not seeing a turnaround.

I'm up - not complaining. And today will be their latest bribe to get me to wait. But by next summer at the latest I'll need to see some evidence that they are putting the missteps behind them or I'll become an ex-shareholder - could be sooner if something else I like becomes very attractively priced.
On the future and innovation. Intel continues to plug away . . . AI, FPGA, driverless, 5g/wireless, advanced memory, dedicated GPU, quantum (yes really www.youtube.com/... ). If the past is any guide, when Intel makes money on these others will jump on board with "me too" but by then Intel will be onto the next thing.
• FPGA. Intel (via its purchase of Altera) is gaining on the only other player on the market. www.fool.com/...
• Wireless. Qualcomm just admits it lost Iphone to Intel. Qualcomm Admits That It Just Lost the iPhone to Intel. www.fool.com/...
• AI. Intel sold $1 billion of AI chips this year. www.reuters.com/...
• 5G. Ericsson, Telstra and Intel achieve first 5G commercial network data call www.pcworld.idg.com.au/... or Intel partners with Nokia and Ericsson on 5G worldwide www.zdnet.com/...
• Intel is also breaking into discrete dedicated GPUs with an all star team of engineers. More here www.forbes.com/...
No talks of 10nm headwinds? AMD will take market because they have superior server architecture. AMD crushes Intel in performance per socket & performance per watt and Total cost of ownership. Just to give you an idea, 7nm+ EPYC Milan (2020 launch) is already locked in for few supercomputers. Rome being 7nm coming in 2019.

AMD run by Lisa Su is not the same AMD that was ran by Hector Ruiz.

Intel is not a buy unless they can show 10nm working performance silicon (not the shitty dual core shitty Canon Lake) and updated roadmap based off 10nm products.

So far they only have 14nm/14nm+ & 14nm++ server products till H1 2020
No AMD's new chip, although hyped, has been exposed as quite mediocre.

• On 11/6/18, AMD tested how one 64-core Rome chip can do vs. two 28-core Intel 8180 Xeon chips, and the performance was equal (Rome finished the C-Ray benchmark in 28 seconds, the two Xeons did it in 30 seconds). But this shows you that AMD is still more than 2 years behind Intel in per-core performance -- because Rome won't be released until mid-2019 and the Xeon 8180s were released mid-2017. So 64 mid-2019 AMD cores are equal to 56 (2x28) mid-2017 Intel cores. www.servethehome.com/...
• Incidentally, Lisa Su knew exactly how much power the Rome chip pulled on the above demo, but she refused to disclose that information.
• The Rome chip has a gigantic and wasteful 14nm die in the middle that does zero processing but sucks power. It's only there to act as interconnect. Poor design. www.anandtech.com/...
• Intel's upcomign Cascade Lake beat AMD's 7nm Rome for the 2019 35 PFLOPS supercomputer: "We took a look at AMD Epyc, both Naples and certainly Rome but with the combination of price, schedules, and performance, we felt like Cascade Lake was the way to get the best value right now." www.nextplatform.com/...
birder profile picture
I think it might be a stretch of the imagination to consider share buy back as a benefit to shareholders. What they have managed to do with the buy back is increase their debt load by 20 billion dollars during the last 4 years.
BINGO birder and according to the authors stats 678,000 shares went right back out, to no doubt the top dogs running Intel. INTC spends more on buybacks than dividends and that is why buybacks are geared to make the top execs richer off of shareholders backs. I dumped INTC years ago around $32 because of the measly dividend and slow movement of the stock. When a management team is blowing wads of cash on buybacks, instead of paying more in dividends and has a lot of debt, means it's a total avoid stock.

Notice the author does not own any or plans to buy any?...
I guess the author sees flaws in buying as well.
Yes, share buybacks and executives being paid with company stock instead of cash are terrible signs.
03 Dec. 2018
When $INTC was at 44-45 and falling, all articles told 'its overpriced'
Now 49 growing, articles tell 'its buy'

Sounds like articles correlate only with stock direction, and tell nothing about real valuation
Intel's forward p/e is right on its seeking alpha page. It's extremely low, because it has priced in bad expectations about things like 10nm. Once those bad expectations are lifted by good news, the stock will go up.
Intel dividend of $3.20? I wish.
Where are you getting your dividend numbers from? Intel paid $0.548 (0.128, 0.14, 0.14, 0.14 for each quarter) total in 2008. Today it pays $1.20 total (0.3 for each quarter). That's a growth rate of ~8.2% compounding. Not 13.6%.

Am I missing something?
Okapi Research profile picture
You are correct. Those were EPS numbers that I mislabeled as dividends per share. I have submitted a correction to the article. Thank you for pointing this out.
From 4/1/2017 to today, INTC Net cash on balance sheet went from 24b to 21B today while still maintaining a 232B EV and 30B in debt...
What happens if a severe downturn comes.... they spent way too much on bad acquisitions....where the ROA...zero?
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