Intel: A Wonderful Company With An Undervalued Stock

| About: Intel Corporation (INTC)
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How often can we invest in a company that is not only a dividend growth stock, but also a strong value stock as well. Intel (NASDAQ:INTC) could potentially reward shareholders with excellent capital appreciation as well as a strong dividend to continue bringing new investors and institutions into the fold.

Some Basics

Intel Corporation (<a href='' title='Intel Corporation'>INTC</a>)

Intel: Price: $27.50/share, Dividend Yield: 3.20%, ESS Rating: Bullish

  • A forward PE of just over 10 which is very low for this sector
  • A dividend payout ratio of just 34% which could mean regular dividend increases for quite some time that are easily paid out
  • Last year revenue was $55 billion with an operating profit margin of nearly 32% which is much greater than the average margins in the sector
  • $14 billion in cash with only $8 billion in total debt
  • Operating cash flow of nearly $20 billion

From Yahoo! Finance, here is the chart of earnings estimates:

Revenue Est Current Qtr.
Jun 12
Next Qtr.
Sep 12
Current Year
Dec 12
Next Year
Dec 13
Avg. Estimate 13.61B 14.83B 57.07B 61.32B
No. of Analysts 43 41 48 43
Low Estimate 13.45B 14.10B 53.10B 56.21B
High Estimate 13.88B 15.46B 58.39B 65.00B
Year Ago Sales 13.03B 14.23B 54.00B 57.07B
Sales Growth (year/est) 4.50% 4.20% 5.70% 7.40%

Consistent growth can be seen according to the analyst's consensus and based on a global recovery, we could be in for some earning surprises.

As a matter of fact I would not be surprised by an earnings beat this quarter, which could propel the stock much higher.

Recent Developments

While it is well know that Intel has been aggressively pursued the mobile market sector as well as expanding it's core chip production business, today the company made further strides towards entrenching itself in the mobile market by acquiring over 1,700 patents and patent applications from InterDigital (NASDAQ:IDCC) for roughly $375 million.

That might sound like a lot of money but when you break it down it is not very much for each patent, and all it would take is just one to be a gem, that alone could add billions in revenue and profits to Intel's bottom line in a business that they are just getting started in.

As noted in this article:

"These patents will support Intel's strategic investments in the mobile segment," said Doug Melamed, Intel senior vice president and general counsel in a prepared statement.

You can read the entire press release right here.

While the rest of the world has been watching the soap opera in Europe, Intel has been steadily increasing it's business in Asia and sees that region as fuel for greater growth as well.

In this report Intel outlines some of it's thoughts on the potential growth in that region:

The company said it was banking on the growth of countries like the Philippines-the second-fastest growing economy in the region next to China in terms of gross domestic product-to drive sales for the rest of the year.

In terms of growth, countries in Southeast Asia and the likes of India and China are among the fastest markets for Intel," said Leighton Philips, product management pricing director for Intel's Asia-Pacific office.

He said the huge populations of these countries and increasing household incomes would lead to the region's citizens wanting better lifestyles.

My Opinion

It does not take much of an imagination to see that if that region delivers, and the Western world finally recovers fully, that Intel is well positioned for continued growth.

The share price is cheap in my opinion and should find a home in just about any type of portfolio.

Plus, you will get paid nicely to wait!

Disclosure: I am long INTC.