Recent Buy

buyIt looks like we’re starting May much the same way we started April: with weakness in the stock market. Headlines regarding the recent French elections, the never-ending eurozone crisis, Greece’s possible departure from the zone and slower growth here and abroad has allowed volatility to rule the day and caused commotion for many investors. With some people heading for the exits, I’m running in the exact opposite direction. I’m buying what they’re selling as I know that 30 years from now many high quality companies will be worth many times what they are today. With that said, I recently purchased additional shares in a high quality technology firm that I feel will reward me as a loyal shareholder for decades to come.

As part of my Recent Buy series, I try to let my readers know of any equities I purchase soon after the transaction is completed. This is just one way I try to document my progress toward early retirement and financial independence.


I purchased 50 shares of Intel Corporation (INTC) on 5/8/12 for $27.11 per share. I already had a position with INTC, but decided to add to it today after some recent weakness. It’s down 5.46% over the last 5 days, which allowed me to swoop in and add to my existing position. Although INTC has had quite a run since I purchased my initial lot of shares last summer, I think there is still value in this tech giant. It’s currently trading for a P/E ratio of 11.59 with a great balance sheet behind it. I think it’s a value as-is, but if they’re able to really get a foothold in the mobile market then the growth could explode. This is currently my only tech holding, but I feel comfortable with a relatively small percentage of my portfolio in technology. Although I think INTC is a winner long-term with their top of the line chips, huge R&D budget and innovation, the world of tech changes quickly.

Intel is the largest microprocessor manufacturer in the world.

Intel is a great dividend growth stock. The recent dividend boost of 7.1%, going from $0.21 quarterly to $0.225 quarterly, was the third dividend increase in 18 months! They’re definitely showing shareholders that they are interested in continuing to grow the dividend. INTC currently has a 5-year dividend growth rate of 14.4%. The entry yield on my purchase price is 3.32% and this purchase will add $45.00 in yearly dividend income to my annual total.

I still have enough capital to make one more purchase in May. I’m still hoping for further volatility with a “sell in May” mindset. We’ll see if we get this or not. If there is a strong general sell-off in the market then I will definitely make one more large purchase (or two small purchases) this month.

With this recent buy I still have 27 positions in my portfolio.

Some analyst opinions on my purchase:

Morningstar currently rates INTC as a 3/5 star valuation.
S&P currently rates INTC a 3/5 star Hold.

I’ll update my Freedom Fund in early June to reflect my recent addition.

What are you buying?

Thanks for reading.

Edit: Corrected dividend rate.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

 

Comments

  1. Anonymous says

    I notice you never purchased Waste Management, ticker symbol WM. What are your thoughts on this stock. The yield is over 4%.

    Disclosure- I don’t own WM

    • says

      Anonymous,

      I’ve looked at WM a few times, and although I think that they have a wonderful business model and dominate their industry, the stock fundamentals were not that great the last I looked. They are a quasi-utility with a fairly heavy debt load (due to being in a capital intensive business), a fairly low yield for a utility and a fairly low dividend growth rate. I’d like to own WM at some point in time, but the fundamentals have to be there.

      Best wishes!

  2. says

    I love INTC. It’s the only tech stock I have. I got in at a good price and it’s still looking attractive. I will be looking to add more shares. They are making a huge push into mobile chips that will drive their bottom line. I have built my personal PC for the last 10 years and up until early last year I was using AMD processors. I have since switched to an Intel quadcore I5-2500k (It has 2000 reviews and received 5 eggs on newegg) and an Intel SSD. I will never go back. Long INTC

    • says

      austinbroker,

      I’m glad to hear you switched to INTC and you’re paying us both back in dividends!

      I really like INTC in the tech sector. The only other stock I’ve considered is MSFT, but I’ve continued to pass on it.

      May we both prosper as fellow shareholders.

      Best wishes.

  3. says

    It’s nice to see INTC growing its dividend again. I would note that it’s going from $.21 to $.225 per quarter however. I hope they make in roads into mobile processors. If they do the stock price will surely go up. It’s my only tech holding as well.

    CI

    • says

      Compounding Income,

      Thanks so much for pointing out my error. I’m not even sure how I posted that up. I’m scratching my head on that one, as my spreadsheet numbers are correct. At any rate, I edited the numbers. Thanks!

      I do hope they start to become aggressive in the mobile processor market. I think they could make great waves if they got some inertia going. ARM has been doing well here so far, but INTC is the 800 lb. gorilla.

      INTC’s dividend growth is really great considering its a tech company. I read some grumblings about the recent raise being “only” 7%, but considering that they’ve raised it three times in 18 months and also considering that 7% is still pretty good compared to a lot of recent raises by the likes of JNJ, PEP and other blue chips, I’m pretty happy!

      Take care!

  4. says

    I read somewhere that Intel has a global market share for processors of 83%. Wicked! Great ROA, great finances.

    But they seem to be wasting alot of cash on aquisitions, recently a software antivirus company. Their return on total investments is way lower then ROA (5 vs 25% according to my homemade calculations).

    • says

      another concern is that AMD has been way more succesfull in the mobile field. But then again the valuation is low, not much growth priced in.

    • says

      defensiven,

      Thanks for stopping by.

      I wasn’t aware that AMD had a large presence in the mobile processor market. I know that ARM has been pretty dominant here.

      I agree with you that there is not a lot of growth priced into INTC shares. Even after its run-up from last summer I still think there is solid value here for the long-term investor. Short-term fluctuations may be on the horizon, but I’m in it for the long haul. Solid yield that’s growing, great balance sheet, the largest company in its field with quality products. I like it!

      Best wishes.

  5. says

    Yes Intel has one of the best numbers, Chevron is the only share that has better profitability and evaluation rates out of those that I have analysed. But whats worries me is that they spend more on share repurchase and dividends then they earn and thus decreasing their equity level. That not good for the company. Also their sales are a bit down from past few quarters.

    • says

      Financial analysis,

      CVX is another solid holding, and one I’m currently looking at adding to.

      Sales didn’t fall in Q1, but were flat rather. Expenses rose, which led to falling earnings. All in all, lackluster but nothing to worry about. Based on guidance, I’m pretty happy with where INTC is going.

      Best wishes!

    • says

      DM great purchase on INTC. I have been trying to jumping in on that one as well. I am waiting for a few days before I swoop in the market and pull trigger. I think we will have few more days of Mr. Market doom and gloom and then everyone will wake up and well we will recover. I have 75 shares set up on a limit buy at $26.55 hoping it hits tomorrow or Friday.. If not I will buy on Friday at market price with 2k.

      Thanks for your blog I look forward to your posting and insights on why you buy or dont buy things. Good luck in the market!

    • says

      jdavis4982,

      I hope you get your with and INTC falls to those levels. That would be a solid long-term price. I certainly hope the weakness continues as I have about $2k I’d like to deploy this month if possible. We’ll see.

      Thanks for stopping by and supporting the journey.

      Best wishes!

  6. Anonymous says

    I like Intel and MSFT. About CHEVRON i just jump in to it this weak. I think this 3 companies are pretty solid!

  7. Anonymous says

    DM,

    I bought Intel a while ago. Great to see your insight on recent developments, that’s great info. for future purchases. Thanks as usual for your sharing.

    Recently, I’ve moved into a little risky stuff. What do you think of ARR?

    best wishes,

    • says

      Anonymous,

      Great to see that you’re a fellow shareholder! I hope we both prosper with our INTC investment.

      I don’t really follow ARR, so I can’t comment. I’ve only looked passingly at a couple REIT’s and that one was not one of them. I’m sorry I can’t be of more assistance.

      Best wishes!

    • says

      Kanwal,

      It looks like you’re making some pretty solid moves there. There is a lot of favorable talk about the Canadian banks and you can’t go wrong with investing in a high yielding telecom. Nice!

      Best wishes.

  8. says

    Solid buy, DM. I still have no tech in my portfolio, but if I were to add one, INTC would probably be at the top of my list.

    I wish I had more cash at the moment. I have enough to make just one more purchase this month, but I would like to make a few more purchases! Maybe I’ll get lucky and the market will still be like this in early June when I am able to add a bit more capital.

    • says

      Deedubs,

      I think INTC would make a nice addition for you. It has a strong yield, solid growth and would allow you to diversify. I’m sure you’ll be a fellow shareholder at some point. Hopefully it dips down and gives you a great opportunity to go long.

      I hear you on the capital, or lack thereof. As I always say- so many stocks, so little capital.

      Take care!

  9. says

    Are you using a broker to buy your shares? If so, which one? I’ve been using Computershare for my direct investing. They are a little slow on the transactions (7-10 days), but I think the fees are usually lower than with most brokers, plus you will get fractional dividend shares.

    • says

      Squeezer,

      I use Scottrade. Transactions are handled swiftly and my costs are $7 per trade, which I think is reasonable. They do not offer a dividend reinvestment plan, but I wouldn’t be interested in one anyway.

      Hope that helps.

      Take care!

  10. Chad says

    Good purchase on INTC. I’m looking at BP with it’s recent price drop. Getting it at under $40 looks like a good price to me. Also looking at WM, PG, and SBSI (your recommendation from last month).

    • says

      Chad,

      You have some solid stocks on the radar. I’ve looked at WM before and have always walked away with a bad feeling. The business model is fantastic, but the fundamentals are lacking. BP is interesting. Value play or value trap? I suppose that position will have better clarity when the fines are finally doled out from the U.S. government.

      PG is solid. SBSI also looks very nice here.

      I’m currently interested in adding to my EMR holdings. PM has been weak lately, and so has MCD. All fine choices.

      Best wishes!

  11. says

    DM, I’m buying MCD and KMR soon. Both of these stocks have pulled back to their 50 day EMA.

    KMR
    Yield: 6.7%
    5yr Growth: 8%

    MCD
    Yield: 3.1%
    5 yr growth: 10%

    I’ve also already added to my Lorillard (LO) position. This has pulled back to a level that is attractive:

    LO
    Yield: 4.9%
    5 yr growth: 11%

    • says

      SFI,

      Thanks for stopping by.

      I’m considering adding to my MCD shares. If they continue downward on weakness and break $90 then that will be my second buy of the month. I’m patiently waiting.

      KMR looks interesting, but what do you think of KMI. Being the general partner, they get access to the higher dividend growth rate. I’ve thought about KMI before but not totally comfortable with the MLP and general partner set-up and prefer normal C-corps.

      LO is interesting, but the continuing government interest in menthol is troubling. I doubt anything will ever come of it, but I much prefer PM in this space over anything domestic and that includes LO and MO. But, the yield is fantastic with all the plays here.

      Best wishes!

  12. says

    MCD was down today. You may get a better price. They reported poor same store sales the other day. Let’s hope we see further weakness.

    Morningstar has increased the estimated growth of KMR to 8%/year because of the El Paso acquisition. The GP (KMI) will see a larger growth rate due to its distribution rights, currently estimated @12%.

    This is a math proposition. A KMI yield of 3% + 12% growth is a 15% return opportunity. A KMR yield of 6.7% + 8% growth opportunity offers a 14% return opportunity. In either case, you will make money.

    LO offers one of the best opportunities of current yield and growth. I still want it cheaper, though before I buy even more.

    The government interest and regulation of LO I see as an asset. It keeps other investors away.

    • says

      SFI,

      Great points there. I agree with you about LO, although the valuation of it is somewhat similar to other tobacco stocks so it’s not trading at a large discount to other plays in this area.

      That’s an interesting point on KMR vs. KMI. I might prefer KMI because of the general partner rights, but as you point out…you’ll make money either way. I like that!

      Best wishes.

  13. says

    DM,

    Great buy on INTC at a great price! There’s been a lot of red this week, so you jumped it at a very opportune time. I’m trying to be a bit more patient, but couldn’t resist, and added some EMR and BP this week. I’m be posting an update to document these purchases soon.

    Cheers!

    • says

      FI Fighter,

      Great buys there. I’m still a little shaky about BP due to the lack of vision/clarity on what the ultimate penalties will be over the Deepwater Horizon disaster, but it’s pretty cheap right now.

      EMR is a solid buy and it’s currently high on my watch list as well. I’m strongly considering adding to it. We’ll see what the market brings us next week.

      Looking forward to your update!

      Best wishes.

  14. Westphalian says

    Very good decision to add to your position in INTC.
    I made it one of my core holdings last year and I`m very happy with it up to now.

    Keep up the great work with your blog.

    Greets

    • says

      Westphalian,

      Looks like we’re fellow shareholders in a wonderful tech company. I look forward to receiving growing dividends for years to come, as I’m sure you do as well. To us both!

      Take care.

  15. says

    I have been adding some INTC now and then. The last was in March at $26.95. Looking for the 30’s sometime this year. Have to see what happens. Of course, I am also selling some calls on the stock as well.

    • says

      cashflowmantra,

      Nice purchase price on INTC. I see it didn’t really dip further after I bought it. If it does decide to dip back down to the 4% yield spot I’ll definitely add to it. I don’t like tech as a major portion of my portfolio, but I’ll scoop it up all day if it’s cheap.

      Anything else you’re adding to right now?

      Best wishes!

  16. says

    Mantra,
    Not sure if I’ve seen you mention this before or not, but do you have your dividends automatically reinvest into more shares of that stock? And if so, do you get a discounted price when you do that?

    Thanks, I’m trying to learn more about this because I graduate from grad school this December and will enter the real world.

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