Recent Buy

The “Fiscal Cliff”. You can’t watch television or read a newspaper without hearing or seeing news on the recent developments in regards to the cliff. Washington appears to be dysfunctional, and appears to enjoy it as individual lawmakers try to leverage partisan policy. This is evident on both sides of the aisle. I’m personally not someone who follows Washington very closely. As such, I couldn’t care less what happens with regards to whatever mania/news comes piping out from headquarters U.S.A.

What I do care about is investing for the long-term. Our nation needs to cut spending and increase revenue on a pretty grand scale and whether this happens through negotiations or the cliff matters not over the very long-term. I’m not really paying attention to Washington. I continue to stay true to my course and inject fresh capital into the stock market by buying attractively priced dividend growth stocks with solid fundamentals. I’m continuing to buy part ownership in companies that have great prospects for future profitability through whatever economic climates persist.

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 70 shares of Intel Corporation (INTC) on 12/5/12 for $19.85 per share. This transaction adds to my current position of 170 shares, bringing the total INTC position to now 240 shares.

This buy may surprise some readers. I’m shy when it comes to tech companies in general, and exposing myself to a fairly large position with just one tech company, especially one that is embattled with slowing PC sales and a CEO retirement, is really not my modus operandi. However, an extremely lengthy and informative article over at Seeking Alpha titled Intel: Inside Track On The Next Decade gave me a number of reasons to increase my stake. Thanks Dividend Growth Machine for pointing this article out.

I wouldn’t let just one article sway my investing decisions ever, but I’ve been looking at INTC recently with intent interest. I find it an extremely undervalued on almost every metric you can use, whether you use historical INTC data or peer valuations. The only thing that was causing me hesitation about buying additional shares in Intel was my already large weighting and my personal bashfulness towards technology as an industry. But, the above article made a great case for the company and I actually personally view the retirement of outgoing CEO Paul Otellini as a good thing. Under his watch INTC has been a bit sluggish in the shift from the PC business it has long dominated to mobile computing, and a fresh perspective at the helm could offer a clearer vision for the future. Another way to look at Intel’s current predicament is that it has less than a 1% market share of smartphones and tablets, so the growth potential is enormous.

Also, it should be noted that the above article highlights the fact that even if Intel doesn’t really grow much from here, even if it stumbles tragically in its bid for establishing a growing foothold in the mobile computing space, INTC would still provide for rather strong shareholder returns simply based on PC/server businesses, the robust dividend and also share buybacks. So, no growth from here would be counteracted somewhat by the extreme undervaluation on the shares. Valuation, as always, is paramount. This isn’t to say that there is no risk in INTC shares. Rather I view the current predicament as a company that is going through a transition and has the foundation to really excel in the future. It could go the other way and INTC could experience a long contraction in its core business, but I feel that the death of this company would be seen a mile away and would provide ample time for shareholders to move on to greener pastures. The mobile computing business is relatively young and the opportunity is still ripe, so Intel still has time to turn the corner.

This purchase adds $63.00 to my annual dividend total based on a current $0.225 quarterly payout. INTC is cheap, with a P/E ratio of 8.81 a P/S ratio of 1.9 and  P/B ratio of 2.0. The balance sheet is very strong, which adds an element of conservatism that I really like. The yield on my purchase of 4.43% is up there with utilities, so there are many attractive elements of INTC shares currently. That high yield is backed by 9 years of consecutive dividend growth and a 5-year dividend growth rate of 14.4%.

Overall, I’d say this is a riskier proposition than some of my other larger holdings which is ironic considering that Intel is considered a blue chip tech stock as it’s currently one of the 30 stocks in the Dow Jones Industrial Average. But winds change, and this is certainly never truer than in the technology industry. However, I also feel that the extremely attractive valuation makes up for many of the inherent risks in INTC shares right now.

With this addition I still have 29 positions in my portfolio.

Some analyst opinions on my recent purchase:

*Morningstar currently rates INTC as a 4/5 star valuation.
*S&P currently rates INTC as a 3/5 star Hold.

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

Full Disclosure: Long INTC

What are you buying?

Thanks for reading.

Edit: Corrected dividend payout numbers.

Comments

  1. says

    Like you I’ve been going back and forth on whether to pick up some more shares. The value is definitely there if they can make any kind of progress in the smartphone/tablet market. The one good thing if they don’t make any serious headway is that the data servers need to make smartphones/tablets be able to access content run on Intel chips so they do have some access to it even if their chips aren’t picked up on a large scale to run the devices. I’ve come very close to picking up some more shares over the past 2 weeks but never quite added to my position. I think I’m going to sell a put and collect the premium and if the shares are put to me then great if not then that’s great too.

    • says

      Pursuit,

      Good point there. As mobile computing picks up steam, the servers that are necessary to communicate with these devices will continue to grow in number and speed and INTC shines there. So, the mobile computing revolution isn’t all bad news to INTC. And, like I said there is still a huge growth opportunity ahead since they lack any significant market share in these devices.

      We’ll see how it shakes out. At any rate, I’m likely done buying INTC shares for quite a while. I’m comfortable with a weighting of about 5% for tech in general, and I didn’t really plan on that all going to one company.

      I’ll be anxiously awaiting your transaction reports for December!

      Best wishes.

    • says

      I wish I could say there’s some on the horizon but INTC is about the only company that I feel is at the price point where I’d like to get in. Everything else is sitting out of my price target for now, hopefully some horrible fiscal cliff news will come out to push the markets down b/c I’m anxious to get my money working for me.

    • says

      Pursuit,

      I hear you. Not much is on my radar either. I’d really like to stiffen up the defense in my portfolio and purchase consumer stocks like KO, PEP, GIS and the like but the value isn’t obvious.

      I like energy currently, and KMI is high on my list. That’s probably where I’ll put at least half my current capital this month and look to go defensive with the rest. We’ll see how it shakes out. Hopefully Mr. Market is in a bad mood next week.

      Take care.

    • says

      I too would like to get a little more defensive but KO and PEP have at least a good 10% to drop before I’d feel comfortable buying in. Not sure about GIS because I haven’t checked on them in awhile. KMI is still there on my list and my plan is to buy closer to $33 or in the $32′s to help lower my cost basis more. I have a limit order for CVX but it’s set for about 4% below the current price. I also set a limit order for a INTC put this morning but that didn’t execute today. Other than that I’m not seeing too much. Hopefully Mr. Market will ruffle some feathers this week to let us go on our own holiday shopping spree.

  2. says

    Mantra, I’m going to be the devil’s advocate here. I do not believe Intel (INTC) is undervalued at all, and is fairly priced (even though it has a healthy profit margin).

    Currently we are seeing a huge shift from PC’s to tablets and smartphones. Companies like Dell, HP, and Sony are suffering from slowing PC sales – and that is before Christmas. This is the core of Intel’s revenue.But Intel also produces chip-sets for servers which is also a big chunk of their business. I wrote about Intel a while ago:

    http://www.dividendstocksonline.com/2011/09/is-intel-a-good-buy/

    My concern with Intel is that it is slow to adapt to change, and running on sales from a dwindling industry. I see it becoming much like another CISCO, a big tech giant that is struggling to maintain its dominant position.

    But I guess the best time to buy is when the news is the worst. ;)

    Cheers
    The Dividend Ninja

    • says

      Ninja,

      Thanks for stopping by.

      You make a great bear case there. I don’t necessarily disagree with you at all. INTC is like the heavyweight champion struggling to stay on his feet deep in the 9th round. This company is beaten up a little bit, but definitely has the strength and experience to persevere.

      We’ll see how it goes. I think the negative of the lack of market share in mobile computing devices can be spun into a positive like I said in the post: it gives INTC tremendous growth opportunities ahead. I think the new CEO could be a refreshing change at the helm.

      In the mean time, it almost acts like a bond paying out 4.4%. Even if the share price goes nowhere for a while I’m okay collecting that hefty payout.

      PC sales have largely matured here in the U.S., but emerging markets will continue to be a driving force for revenue growth as consumers in many of these markets experience a rise in income and PC prices come down. I don’t think the PC is “dead”, but Intel definitely needs to make inroads into mobile computing.

      I think the death of the PC and the death of Intel is largely exaggerated, but if I’m wrong then I have not invested in INTC to the point that I’ll be wiped out if the investment goes to $0. INTC going to $0 would only represent less than 2 months of savings.

      Like I said, it’s a higher risk/higher reward play than I’m used to. It is, however, still a blue chip stock so I view the risk in this case as possibly over-exaggerated so I do see some value here. How much value will ultimately be seen years from now when INTC is either making low energy high performance chips that are popular in mobile computing or they are not. Their other businesses will keep the ship floating just fine until then.

      Best regards!

    • Steve says

      I recently bought INTC myself. This is the kind of purchase that makes investing a challenge. It could be a great “Buffet” move or it could be standing on the deck of the Titanic collecting dividends as the ship goes down. I agree that the downfall (if it comes) will be slow enough that we’ll at least be able to salvage some of our investment if we go down.

      I don’t think the PC is going any where. I see tablets as a niche market. They are too big to carry comfortably and too small to do serious computing. I think the key to INTC getting into the mobile market is smart phones. We’ll see how they do.

      Take care.

    • says

      Steve,

      That’s funny: collecting dividends as the Titanic goes down. Better than drowning empty handed I suppose! :)

      I agree with you. I simply don’t see the PC dying off as some kind of product that is now useless. The tablet is now a niche product, but this also may change as they become more advanced and can process more functions. Personally, I own a Toshiba laptop that I purchased three years ago and I’ve tried to do serious computing on a tablet and failed miserably. They’re fun to use, but I still don’t see how they replace a desktop/laptop. At least not yet.

      One has to also remember that we live in the U.S. Many emerging markets and third world countries are just now getting around to being able to purchase computers. I don’t see them skipping right over something that can actually produce for something that’s fun to use.

      We’ll see how INTC works out for us! I wish us both the best. :)

      Best wishes!

  3. says

    I’ve been looking at Intel for a while. I think you can make a case for owning it based upon valuation. This is how value investors make money: buying a cheap company, then make money by dividends, share buybacks and earnings growth (even if it’s modest).

    Though, I have to laugh at analysts. First they say that Intel is a bad investment because tablet growth is eating into market share. Then, if you ask them about Apple (who is a leader in the tablet/smartphone space), they say Apple is done because they haven’t announced the next ‘thing’.

    Believe it or not, Apple is as cheap as Intel. After backing out 130B of cash, Apple trades at a P/E of 8. So, would you rather own Intel (in the hope that PCs are OK and that they can make money in mobile), or the company with the proven record in the current growth spaces of tablets/smartphones? Also, Apple has a 2% yield to boot, plus has substantial growth in its PCs faster than the overall market.

    PCs are 35 years old, tablets are 2 years old and smartphones (the current iPhone/Android version) are 5 years old. There is plenty more life in all of these products, even for Intel. You have to be patient as Intel tries to make a path for itself in the new technologies. But, I still think Apple is the better buy here.

    • Bo says

      Have a look at the lower right hand corner to see where their profits come from:

      http://www.asymco.com/wp-content/uploads/2012/08/Screen-Shot-2012-08-21-at-8-21-3.42.30-PM.png

      Looks like 70% of company profit is from Iphone, 15% from Ipad, and everything else is a small sliver of the pie.

      These are my long term concerns with AAPL. They have very few eggs and in relatively few baskets. Very good eggs and baskets to have right now for sure, but their core profit driver (iPhone) isn’t a product. It’s a series of products that need to be reinvented every year as a new magic product and that’s hard to do.

      It’s the tech equivalent of movie sequels. Credit to them for making the blockbusters that they have since the iPod but how long can that really be sustained? The iphone is being chipped at and competitors are working voraciously in he tablet market right now, so eventually they’ll need the next iThings to come in and make an impact like the iPod, iPhone and iPad lines did.

    • says

      SFI,

      I don’t think it’s a zero sum game. One could invest in Apple and Intel.

      Apple is a great company and has obviously revolutionized the way we think about phones, computers and music. Great stuff. But, the yield isn’t there and I do wonder about how long the revolution can carry on. They certainly are not a one trick pony, but innovation at the highest standards is hard to continuously replicate.

      Intel doesn’t need to revolutionize anything to be successful. They simply need to change the way they look at success – and make the low consumption/high performance chips the market demands. They’ve been slow to adapt, and hence the low valuation.

      We’ll see how it shakes out.

      Best regards.

  4. says

    I saw that Intel article on Seeking Alpha that Mantra referenced.

    That’s one of the most comprehensive articles I’ve read on any stock at any time. Whether someone is bullish or bearish on Intel (especially if they’re bearish), that article is pretty much the gold standard to read for the next few months.

    • says

      Matt,

      Thanks for stopping by.

      I agree. It was an extremely comprehensive article and I read it with gusto. If you weren’t sure where you stood with Intel before reading that article, I’m certain you’ll know how you feel after.

      I was a little hesitant about adding to my position, but considering the valuation I felt compelled to buy additional shares based on shareholder yield alone.

      Take care!

  5. says

    Nice purchase and thanks for the mention. I think it is possible to construct reasonable bull and bear cases for INTC, but based on everything I’ve read, I continue to maintain a bullish view. Could I be wrong? Sure, but that’s the situation with every investment and part of the risk/reward tradeoff of being a value investor. I will continue to monitor INTC and I look forward to seeing how the company performs in 2013 and beyond.

    • says

      DGM,

      I agree. The risk profile is probably a little heightened on this one compared to most of the equities I invest in, but so is the reward. That’s the quandary us investors often find ourselves in.

      I’m more than willing to give INTC a few years to build a solid mobile computing business while I collect a robust, and rising, dividend. It’ll be one to monitor, just like any other investment.

      Best wishes!

  6. says

    Hey, well nice purchase at INTC I think it’s cheap. I’ve wanted to put either that or softie in my portfolio but have a really hard time pulling the trigger on either. I think I’ve decided I could have 0 tech in my portfolio and be just fine, that stuff is too volatile for me. I do have IBM however I wouldn’t really consider them tech anymore.

    I do have a question for you though, I recently had an awful customer experience with verizon and thinking that alone will make me sell my shares. do you let things like that sway your decisions at all? I think I’m going to replace verizon with KMB, a stock you also noticingly lack. KMB is one of those stocks i feel every DGI should have, are you just waiting for a better valuation? or do you not like the company?

    At any rate I think im going to sell VZ and buy KMB, this will leave me with nothing in the telephone market but I’m okay with that for now. I don’t really like T, and VOD I dont really understand, the dividend bounces all over the place and its only once every 6 months. Speaking of earlier you called DD not a traditional DGI stock, however that seems more DGI then VOD? based on just looking at dividend history. Perhaps you can explain how the VOD dividend works since im sure exchange rates effect it?

    Thanks!

    • says

      Took2Summit,

      I’m with you on having 0 tech in the portfolio. If INTC wasn’t yielding as much as a utility, and if I didn’t feel that the dividend/business was sustainable, I wouldn’t invest in it. But, I feel that having a little tech exposure allows for greater diversification and getting such a high yield with it is certainly icing on the cake.

      I’ve never been a huge fan of KMB. Of course, it looks like the market disagrees with me as KMB has had a nice run this year. The product line-up for KMB is mostly paper products and it just seems easy (to me) for consumers to trade down. I’m not saying I’ll never own KMB, but I have in the past been hesitant because I wondered what kind of economic moat one can have based on brand name paper products.

      To answer your questions on DD and VOD:

      DD is not a dividend growth stock. The dividend through the years of 2008, 2009, 2010 and 2011 was $0.41 per share quarterly. It wasn’t until mid-2012 that it changed. Holding a dividend static for over 4 years is definitely not a model for dividend growth.

      VOD, on the other hand, has been growing the dividend in its native currency since 2000. And the growth, even factoring the high yield, has been quite attractive. Now, the confusion occurs because that dividend in pence has to be converted to dollars and because of that the growth doesn’t always come through due to currency risk. That currency risk can swing either way depending on the dollar’s strength. That currency risk is one of the benefits/drawbacks to investing internationally. But, VOD has been growing the dividend quite aggressively over the last 12 years.

      In pence:

      http://www.vodafone.com/content/index/investors/shareholders/ordinary_shareholders/dividends.html

      In U.S. dollars for ADR shareholder:

      http://www.vodafone.com/content/index/investors/shareholders/adr_holders/dividends.html

      I hope that helps!

      Best wishes.

  7. says

    Nice purchase DM. I know you have been on the fence for a while in regards to adding more of INTC. I think you are ok. I’m looking to add to my position when the market pulls back again…

    • says

      The Stoic,

      Yes, I was a bit hesitant about adding additional INTC shares. I feel that the value is definitely there but I don’t want to increase my risk beyond a tolerable level. Right now the balance sheet is strong, dividends are handily covered by FCF and EPS, and they have an opportunity to expand on the core business. I hope they take the uphill battle seriously, however.

      How large a position with INTC would you feel comfortable with?

      Take care!

    • says

      Not sure DM. I’m like Headed Home. I’m ok with holding a concentrated portfolio. I don’t focus on the weight of the individual holding as much as I do the prospects for the company and the valuation. At fair to undervalue, I’m a buyer…

    • says

      Stoic,

      I think a concentrated portfolio is certainly a great way to build wealth, but it depends on your goals.

      If you’re primarily looking for total returns, then betting big on a few opportunities that you feel are sure-fire is probably a good way to get there.

      For me, my primary goal is income replacement and income security. I can only ask myself: is my dividend income (what I’ll be relying on to pay rent and food bills) more stable and reliable with 40 companies paying me or only 10? If one of my holdings cuts it dividend will I be hurt more with more holdings or less?

      The answer is obvious.

      Best wishes!

  8. says

    I have been looking at Intel for the past 2 years as an income stock. I haven’t been able to pull the trigger. The stock is cheap, but is it a value trap? If you look at 10 year EPS trends, EPS is a little volatile.

    Also, do not forget that INTC has to keep investing heavily in R&D to stay current. A company like MCD on the other does not need to reinvent its menu every 18 months like INTC. Seems like I am the only dividend investor out there who doesn’t own INTC…

    • says

      DGI,

      Well, INTC acts like a cyclical stock with erratic EPS numbers but has averaged annualized growth of over 10% over the last seven years. This is definitely not a stock that has consumer staple type stability. However, the yield and growth potential is there.

      INTC has big R&D numbers, especially over the last year. Cash flow is solid and usually FCF is off the charts, but R&D through CAPEX can reduce this. Even factoring in the huge R&D budget, however, the dividend is well covered.

      Innovation is huge in technology. One doesn’t need to look far to see how important it is. Apple is a great example of this.

      However, MCD also needs to innovate as well, just not on the level of big tech companies. For instance, the new CBO (Cheddar, Bacon, Onion) menu was innovation and it’s been a hit so far. So, obviously the amount of money needed to come up with the right onions, the right flavor of cheeddar cheese and mushrooms that can stay flavorful before they’re put on the sandwich is significantly less on an R&D budget line than lower power consumption microchips…but the innovation is still necessary.

      Again, I’d view INTC as having a slightly higher risk/reward profile than most of the stocks (MCD, PM, PEP) that I usually invest in. I do believe that INTC will have favorable business operations in 5 years or I wouldn’t invest in it, but obviously the market and consumers will dictate that. We’ll see how it shakes out.

      Best wishes!

  9. says

    I’m a big fan of having a fairly concentrated portfolio. For larger positions you just need to do more work to be certain of what you’re getting with the holding. It sounds like you’ve done the work, so great job!

    • says

      Headed Home,

      I remember reading on your blog that you’re a fan of concentrated portfolios and you planned on reducing the positions in yours. I actually like a larger portfolio and will probably end up with over 40 positions before I’m done. But, I view each one an equally important piece of the pie and like a father love each one equally (that’s what people tell their kids, right?).

      I hope I’ve done enough homework on this one. I try to do a fair amount of due diligence on every stock I purchase, even when adding to positions I’m already invested in (as market conditions continually change). But, the risk is always there and that’s one of the reasons we’re receiving a higher rate of return on our money than if it was languishing in a 0.02% bank account.

      I hope the reduction of your portfolio in terms of positions size works out great for you. I know there are many fans of that strategy and it can serve one well if you make the right choices. My only concern with that type of portfolio is that it’s certainly less forgiving if you commit an “unforced error”. If you’re long 8 stocks with big money in each one and one position sours then you’re hurting on 1/8 of your money. If you have 40 positions and one sours significantly, then you’re out 1/40 of your money.

      Like you said, it’s simply important to be certain of you’re getting and carefully monitor.

      Best regards!

  10. Anonymous says

    INTC, like any stock, has it’s risks. But I think this is as good of a bet as any stock right now. It’s one of my largest holdings at the moment.

    • says

      Anonymous,

      I think the value offers a really solid opportunity as long as INTC doesn’t decline significantly from here. If they can even just stay flat for the next 5 years or so, I think we’ll do well simply based on dividends and share buybacks. Any growth/mobile computing progress will simply propel this into a great investment.

      The downside appears limited to me, while the upside could be significant.

      Best wishes!

  11. says

    DM,

    Nice buy! INTC looks like one of the few remaining bargains left at present time. I’m a bit disappointed the post-election pullback didn’t last longer. I was almost certain all this fiscal cliff chatter would keep the markets swinging wildly. Especially as we approach the end of the year. But I’ll be patient. I’m going to try and wait for a better entry point before I start to load up again.

    • says

      FI Fighter,

      I’m also a bit disappointed, and surprised, at the way the market has performed in the wake of so many headwinds. I honestly thought we’d see weakness here with capital gains being taken off the table for tax purposes, the fiscal cliff fiasco, Europe and everything else. Just goes to show you how impossible it is to try and time the market…which is why I don’t.

      Individual equities, however, aren’t providing much value. INTC is one of the few clear cut value plays out there, as long as you don’t feel it’s a value trap. Some energy names are still attractive, but everything I’m watching has been rising day after day. My cash, in the meantime, is patiently waiting.

      Happy hunting!

      Best regards.

    • Steve says

      I agree. Nearly every stock I’m watching is close to or has passed its 52 week high. Very frustrating! I am looking for a strong company in consumer staples with strong international sales. PG, CLX, GIS, CL are on my watch list but are expensive at the moment.

      I am hoping for a “fiscal cliff” sell off around the first of the year. We’ll see. With valuations this high it seems that it should not be hard to trigger a sell off in the general market.

  12. says

    Since I am in the phase of building my portfolio I only have a few stocks and I am buying more of those instead of adding new holdings. So currently I was buying ARR, FULL, ABT, MCD, O, and I am ready to add SDY (dividend aristocrats ETF) but waiting for prices correcting from recent levels (going back to 200 day MA or even lower), so currently, while waiting for my price I am saving money, selling puts and calls on other of my holdings and generate cash which can be used to purchase more shares.

    • says

      Martin,

      Interesting names there.

      Not a bad idea to stay patient and save cash for better opportunities right now. The market isn’t exactly selling a lot of discounts right now, but I do hope to have a chance to unload a little capital before the end of the year. We’ll see what we get.

      Good luck!

      Take care.

    • says

      I agree, couple of my holdings recently offered good prices to add more shares, some of them I am waiting and saving for it. I do not remember where I read it, but the article read about not being always fully invested, (which I always was and when the opportunity arose I had no cash). So I made a plan when the market is rising I just save money and leave it in cash. As the market starts correcting I start cherry picking and adding to my holdings. SDY is a great example of what I want to do. It rose recently and I have three buy zones, first is on 200 day MA, second is at 53.3 and the third is at 47.8 The stock may never go there (but these are based on 5 year long term upward trend line) but you never know, the stock can one day correct to its long term trend line and that will be a great opportunity to add more shares.

  13. says

    I have beeen in the same camp as Dividend Growth Investor. Has looked cheap for awhile but couldn’t bring myself to pull the trigger. This is in part because like you (and some of the other posters) I don’t want a big tech position and I bought MSFT at about $30 a few months ago (and it has struggled). Both MSFT and INTC appear to be leveraged to the PC to a large extent, although I acknowledge there are other opportunities for both. I don’t think the PC is going anywhere, but at this point not prepared to place a large bet on that! Time will tell…

    • says

      Dining,

      Thanks for stopping by. Glad to see your blog is off to a nice start. Great looking portfolio there with some strong U.S. and Canadian names. Love the blog title.

      I hear you on tech. I’m a big Buffett fan, and am currently reading “Tap Dancing To Work”. He’s also very shy when it comes to investing in tech..at least up until his big play on IBM. I’m also tech averse and have about as much money in INTC as I feel comfortable with, even if my portfolio doubles in value. I’d like another tech name in there, while still keeping tech to about 5% overall…so there has to be some room made.

      We’ll see how it plays out. I just don’t see a lot of other real attractive opportunities right now.

      INTC and MSFT are both fairly leveraged to the PC, although I would argue that INTC has a bit more flexibility than MSFT in this regard if they can start producing the products the market demands and wants to buy.

      Best wishes.

  14. says

    I like this purchase. Actually the dividend is $.225 per quarter so you’ll be paid $63.00 per year for holding those shares. Even better! :)

    I too have been toying with the idea of buying more Intel stock. I’ve seen it go under $18 in the past and it has been falling rapidly the past few months. I’ve just been waiting to see where it might stabilize. It appears that $19.50-$20.00 is where I’ll be looking to buy.

    I’m not a tech expert but I’ve spent a lot of time reading about mobile processors and it seems Intel is competitive. I don’t know if Intel will dominate mobile like they do PCs. I do know they aren’t going out of business anytime soon. However I question the dividend growth. Luckily with a great yield of 4.5% the dividend growth doesn’t need to very high for it to meet my standards. 4% raises is just fine for a yield like that.

    For me, a big question is whether or not they will continue raising that dividend. If business continues to sour the streak could be in jeopardy. Even the 2012 raise wasn’t all that great compared to recent years. The value is there, the certainty is not. I will likely make one more purchase and that’s it!

    If the market falls in love with INTC in the future I will have to remind myself to prune back the position. I considered doing so when the yield was under 3% a few months back. I should have!

    • says

      Compounding Income,

      Thanks for catching that! I edited the post to reflect the true numbers. I don’t know how I made that mistake. I think that’s the second time I’ve done that now. Doh!

      I also don’t know if they’ll end up “dominating” mobile processors. Based on the slow start, it’d be hard to imagine that. But this industry changes fast. The good news is that any growth is great, as their current abysmal market share is so low. If they can get a 15-20% market share in mobile processors over the next 5 years that would be wonderful, in my opinion.

      You’re right. With the high entry yield, the dividend growth doesn’t need to be outstanding to achieve a satisfactory rate of return. That’s what my post was getting to: INTC shares are valued to the point now that now growth at all will still lead to pretty satisfactory (high single digit or even low double digit) returns simply based on current sales, share buybacks and the dividend (along with the growth of the dividend).

      Hindsight is always 20/20. Of course now I wish I would have sold out of INTC in the high $20′s and repurchased back at $19.50…but I don’t regret what I did at all. I think INTC is fairly valued all the way up to about $30 per share…so why would I sell an undervalued stock that’s still paying out a rising dividend? Fundamentals haven’t changed yet, but of course again that can change if they don’t take these headwinds seriously.

      Best wishes!

  15. says

    Intel is a fine company. I am not a big fan of high profile well known companies for the most part unless their a really undervalued security. Whenever a company gets usually popular than its time to use caution. Apples a perfect exapmle of this. Intel does not have the aura around it that apple has.

Join The Discussion!