Recent Sale

This is a tough article to write. I don’t like to sell stocks too often. I look at each stock in my portfolio as valuable branches to my dividend growth tree, ultimately providing me bountiful dividends with which to pay my expenses. Every time I cut a branch from my tree, my tree produces less dividends. However, if it’s the occasional pruning to make the tree stronger and better over the long haul, then it is a chore I must perform and ultimately will be better off for it.

This is only the sixth “Recent Sale” article I’ve ever written, and this blog has been live since early 2011. I take each and every sale extremely seriously, perhaps even more so than the actual buying of equities. I remember reading somewhere that your portfolio is like soap – the more you handle it, the less you’ll have of it in the end. I think that is an apt quote, and something I try to remember every time I contemplate selling any securities. However, when I feel compelled to move on I do just so, even with a heavy heart.

I sold 140 shares of Intel Corporation (INTC) on 9/25/13 for $23.746 per share, for a total net sale of $3,317.37 after commissions.

I’ve been a shareholder of INTC since the summer of 2011. I’ve been a patient investor, as I proclaim myself to be. However, I’ve watched as INTC has time and again predicted new chips to allow the inroads into mobile computing that they have previously lacked, and time and again they have come up short. Intel has long been dominant in the PC market where they see high margins on high performance chips, but unfortunately PC sales have been sagging worldwide over the last couple of years. It’s been predicted that worldwide PC sales will contract by almost 8% this year as computing increasingly moves to mobile machines.

Revenue and earnings have been flat, or decreasing over the last couple years. In July, Intel reported revenue of $12.8 billion compared to $13.5 billion during the same period last year. Lower revenue and EPS here and there is typically not a big concern for me, as I’m in this for the long haul. And Intel has long operated in a cyclical industry as new chips come online, replacing old ones and PC sales surge and fall. However, I’m concerned that this time around the changes we’re seeing in Intel’s business is more secular and less cyclical.

Perhaps the biggest offense for Intel lately has been keeping the dividend static for six consecutive quarters now. On Wednesday, the company announced a $0.225 dividend for the final dividend payment of the year, payable in December. This means that Intel will go a full calender year without a dividend raise, as all four payments this year will be $0.225 per share, which was the same payout as the final two payouts of 2012. While this isn’t a death knell from a dividend growth investor’s perspective, it does perhaps become telling that management is not confident enough about operations to keep raising the dividend on schedule. The dividend growth streak will remain intact assuming the company raises the dividend payout in 2014, as they’ll still pay out more in 2013 then they did in 2012, as the dividend was last raised for the third payout of 2012.

2013 has been a big year of changes for Intel. They’ve brought a new CEO on board, and a slew of new products are coming online. The new Bay Trail chip, based on the Atom processor line, is just now seeing the market and the company, and fans of the company, are predicting big sales and major inroads into mobile. Haswell is also supposed to make waves in hybrid convertible ultrabooks.  However, it seems to me that Intel has been banging this drum for two years now with little to show for it. I love the company’s resourcefulness and the large R&D budget functions as an economic moat. I still believe they make great chips, but whether or not they can compete with lower margin/lower power chips in the mobile space is unproven.

So, with a static dividend, lack of progress in the mobile space, flat revenue and a lot more questions than answers I have decided to sell of a significant portion of my position in Intel. I still have 100 shares, so I’m not counting them out just yet. I’m hoping that the company and analysts are correct about the new products and the righting of the ship. In my opinion, Intel needs to be a major force in mobile computing to have a viable future.

These 140 shares came at a cost of $3,338.81 for a cost basis per share of $23.84. However, I also received a tidy sum of dividends during this time. Total dividends received during this time amount to $220.68 (factoring out the 100 shares I still own). That means my total return on these shares amounts to 7.3%. Not particularly impressive considering the S&P 500 is up about 27% since early June (which is when I first invested in Intel).

Again, I’m still holding a small piece of this company. However, I never intended for it to ever be as large of a position as it became. I felt shares were undervalued on the separate occasions I purchased, and I thought the inroads into mobile would come about sooner and easier. I still feel that Intel has a lot of potential, or else I would have sold the entire position. My position at 100 shares is now a much more comfortable size for me, especially seeing as I’m not a real big fan of the tech sector as a whole.

This sale reduces my annual dividend total by $126.00.

I’ve already used the proceeds from this sale to open a position in an oil major. I’ll be discussing that very soon!

How about you? A fan of Intel right now? Think I made a mistake? Did I make the right choice?

Thanks for reading.

Photo Credit: jannoon028/FreeDigitalPhotos.net

Edit: Corrected number of “Recent Sale” referenced articles to six from five.

Comments

  1. says

    That’s funny. I sold a partial position yesterday as well. I decreased my position by about 1/3 and the rest of the shares are on a short leash. Its a shane because I also hate to sell. In this case though I was able to put the peoceeds to work in a position that has more positive trends going for it right now. Even if Intel is able to make grounds in mobile/tablets I still don’t know how the company will be because in order to compete they’re going to have to most likely accept lower margins. Unless a huge change in companies upgrading their computers then intel could still struggle. I’m torn on the rest of my position but I’m taking a wait and see approach for now.

    • says

      Pursuit,

      I noticed you sold as well. Same day, too. That’s funny!

      I’ve been less than impressed with Intel. I’m still holding 100 shares in hopes that Bay Trail will do well, but there’s really no way to tell what’s going to happen here. They still hold huge advantages in the PC and server markets, but they need to make serious moves in mobile or their future will be significantly less bright than their past was.

      I’m also torn on the rest of my position. The 6th consecutive $0.225 dividend was a sign for me that I need to reduce my exposure here. Hopefully I won’t have to sell the rest.

      Best wishes!

    • says

      I never really understood Intel – that’s why I never owned a single share. I thought investors were buying it simply because of the high yield.

      Now that everyone seems to be selling it however, the contrarian in me wants to consider initiating a position in the company. The rational DGI prevails however, and won’t do anything, as I still do not understand INTC.

      Good luck in your investing!

    • says

      DGI,

      I understood the general desire to own Intel, but like some things in life it just didn’t turned out as expected. I think the thesis is correct, but the company has been unable to deliver. I agree with you that the high yield is what enticed many of us dividend growth investors, however I would add the aggressive growth of the dividend was more impressive to me.

      I’m hoping that good things are still ahead for INTC as I still own 100 shares. We’ll see how it goes! :)

      Good luck to you as well.

      Best regards.

    • Anonymous says

      Agree DGI. I’ve never owned INTC nor a tech stock since I got burned 2002. But that was another stage, then I didn’t knew anything about dividend growth investing.

      When INTC was about 19 I was a bit compelled to pull the trigger because the yield, but then I figured out that I really knew anything about the business, and no energy nor time to make efforts to understand it. For me it’s easier to understand KO, MO or whatever similar, so I didn’t buy and kept sleeping well.

      I think my closest position to techie stocks is DLR.

      Manefla

    • says

      I’ll admit that I kind of bought into the hype about the yield and it’s DG. I had purchased shares when I was young as far as investment age so I think there’s worse things you can do than lose $40 to learn a lesson, still up on the total position that I had though. I purchased because I was under the belief that they would start making ground in mobile by now, which they haven’t made much of dent. But my main reason for selling is that even if they could take 50%+ of the market share for mobile/tablet chips that still won’t make up for the declining PC volumes due to the much lower margins and lower sale price. I think there’s still a chance in the short/medium term as eventually companies will go through IT upgrades, MSFT ends Windows XP support I think late this year or early next year, so I think you could start seeing more of the upgrade cycle. In my view that’s just a temporary bump as the upgrade cycles are getting longer and longer due to the technology just not getting as old as fast.

      @Martin – if around 200 shares of a mega cap is enough to move the needle on the company then my idea of how the market works is completely shot. ;)

  2. says

    Intel completely missed the boat on mobile computing and there have been terrible decisions in the past from the management. For a company the size of Intel, there is no excuse for focusing on PCs and ignoring the rest of the industry. They had a debacle on the consumer electronics front, but it appears that the lessons werent learnt. I decided to put my money into Qualcomm – the leader in mobile computing processors, which are used in most Androids, Windows and Blackberry phones. Qualcomm only pays about 2% for now, but their dividends have been growing at a good pace.

    • says

      Roadmap2Retire,

      They have definitely missed the boat. I honestly thought they would have done better, and I think the change at CEO was a reflection on the need to make big changes. I thought the R&D would allow them to remain a leader in PC while also moving to the forefront of mobile.

      You made a much better choice than I, investing in Qualcomm. To be honest, I never took a look at them. My mistake. They make chips based on ARM designs, correct? QCOM looks a little pricey here, but if they fall a bit I might seriously take a look!

      Take care.

    • says

      Mantra,
      You are correct. Qualcomm design ARM-based chipsets. I agree that the stock looks a tad pricey at the current level. I will be keeping an eye out on it and increase my position in case of pullbacks.

      cheers

    • says

      I also own 400 shares of QCOM and they have treated me well. The CDMA patents are their “franchise player”, much like AMGN with Neupogen, or MSFT with Windows.

    • says

      S.B.,

      Nice job on the QCOM play. That appears to be the much better choice. :)

      I’ll have to really take a look. If it dips fairly significantly from here I’d be interested in it. Do you have a particular price you deem “fair” for QCOM?

      Take care!

    • says

      FFDividend,

      Certainly. PC’s aren’t going away tomorrow. And Intel has major advantages in PC and the server market. However, the growth will be in mobile computing for the foreseeable future. If they really lose the mobile war and give up they would have to reduce CapEx via R&D spending and focus cash on share buybacks to fuel EPS growth and dividend growth at that point. However, this wouldn’t make sense because innovation is imperative in tech. If they don’t make serious dents in mobile computing with the new Atom processor (Bay Trail) in early 2014 I’ll be looking to exit the rest of my position.

      Best wishes!

  3. says

    Jason,

    My guess is that you would have bought BP with the proceeds. Am i right? I was personally watching it closely, wanted to buy at below 42 however did not get that chance so far.

    -Jaspinder

    • says

      Jaspinder,

      You nailed it! I’ve been looking at it for a while and could have bought it cheaper. However, I always found what I felt were better opportunities. This time, I had a large portion of cash at my disposal and I’ve been itching to initiate a position on one of the cheapest (if not the cheapest) multinational large-cap companies available on the market. I was also able to actually increase my dividend income via the trade (INTC to BP).

      I’ll be talking about this purchase soon. :)

      Take care.

  4. Steve says

    I guessed that it was just a matter of time until you sold. I liquidated my position several months ago. My reasoning was a bit different from yours. I reevaluated why I bought INTC to begin with and realized that I was holding it as a “turn around” company. While I think INTC has a much better than average chance of turning around, I realized that my current DGI strategy doesn’t allow for this kind of company in my portfolio. I only have nine stocks at the moment as I am in the building phase. Having one of those stocks be INTC introduces much more risk to my portfolio than I want so I sold.

    Maybe one day soon INTC will be another IBM–much more diversified and thereby much more stable (and no doubt much more expensive). I think you are wise to hold on to your 100 shares. Considering the size of your portfolio, INTC represents a reasonable amount of risk considering the potential upside if they do end up turning their business around.

    Well, onward and upward. October is a new month and with it, opportunities for new purchases!

    • says

      Steve,

      “Having one of those stocks be INTC introduces much more risk to my portfolio than I want so I sold.”

      Exactly. It was all about risk for me. Having such a large amount of exposure to INTC made me uncomfortable. I never intended for INTC to have such a large weighting within my portfolio.

      I hope you’re right and INTC diversifies operations a bit. I don’t see them giving up dominance in the PC and server businesses anytime soon, so if mobile doesn’t work out as planned due to entrenched players they could diversify away from hardware and into services. It’s not impossible.

      That would be interesting!

      October is definitely a new month. New opportunities and challenges.

      Good luck.

      Cheers!

  5. says

    This is interesting. Buying on weakness, I actually picked up 300 shares of INTC about 3 weeks back, so I guess I can be the contrarian.

    Don’t confuse INTC for a Microsoft or a Blackberry, i.e. rudderless. Yes, Intel missed the boat on mobile, but the company has the marketing, intellectual talent and cash to turn it around.

    The company has a history of being ruthless when it comes to competing in the chip market. I suspect that within the next 24 months we are going to see mobile processors that are cooler, cheaper, smaller and faster than their competition.

    • says

      Matthew Gil,

      I don’t think you’re a contrarian. I still hold a position with the company and there are plenty of things to be optimistic about. At some point PC sales bottom and the business has nowhere to go but up. It all depends on your risk tolerance and objectives.

      The company does have a history of being ruthless. I think that’s what led it to have such power within the Wintel setup. They dominated competitors and never looked back. However, that clout doesn’t necessarily translate over to mobile, and we’ve kind of seen that now. I’m hoping that you’re right regarding the mobile processors as that would make me a very happy shareholder!

      Best wishes.

  6. Spoonman says

    I made my move a couple of months ago when it became apparent that they weren’t planning on raising the dividend at the appointed time. I sold 2/3 of my INTC holdings, and I plan on keeping the remaining 1/3 until the first quarter of 2014. If by that time they have not raised their dividend, even by 1 cent, then I will just sell the rest of my stake in INTC.

    I had a similar scare with one of my REITs (UHT) a couple of years ago and I gave them the benefit of the doubt. They came through and raised their dividend in the end. I’m hoping that INTC will at least make a symbolic effort to increase its dividend, at least that will signal to investors that management hasn’t forgotten about them. We’ll see.

    But hey, I think the fact that you only have 5 sells so far is a triumph. I have very few sells myself, and I’m quite proud of that.

    • says

      Spoonman,

      Nice job. You beat me to the punch. You sold a similar amount to me (1/3). I’m also waiting to see what happens in early 2014. By then we’ll know how Bay Trail is doing and whether or not management is committed to growing the dividend.

      There has been some recent scares regarding dividend growth and the company in general. I remember ADM going through something similar at the end of last year. They ended up raising the dividend in early 2013 and took off. I remember I was looking at them around $25/share or so and passed because of concerns about droughts and the dividend. Proves you just never know. So, I hope INTC ends up like ADM and this is just a bump in an otherwise great and long relationship. :)

      Regarding the sells, thanks! I’m also quite proud of the lack of sales. I think it proves that when I say I’m a long-term investor I mean it, and that my ability to pick high quality and stick with it is generally better than not. Hopefully I’m able to keep the sales to a minimum going forward. The only other position I’m keeping a close eye on right now is VOD. However, that’s because of fundamental changes in the company.

      Best wishes!

  7. says

    Sold them all yesterday after reading Seeking Alpha . Took the money to buy a worse looking one: SPLS . I do not know if one can call Staples a growth stock, but I thought it may make a comeback. When I do that kind of semi error of buying a tired horse like INTC , I think of some of Buffett’s wise words.

    • says

      Aspenhawk,

      Never took a look at SPLS. The only concern I have with that company is that every time I see a Staples store it’s empty and in poorly located retail centers. Just anecdotal experience there. I hope it works out for you! :)

      Take care.

  8. Anonymous says

    I sold last quarter, it has fallen 5.37% since. Don’t increase the dividend, sell it because it means something is wrong.

    • says

      Anonymous,

      A lack of a dividend increase isn’t necessarily a death knell for me. As long as they keep their streak alive and my income can increase calender year to year I’m okay. However, INTC would absolutely have to raise the dividend in 2014 to keep their streak alive. And I’m inclined not to wait too long into 2014 to see that happen.

      Good job selling before I did. I was being patient and really searching my feelings on this one. The 6th consecutive unchanged dividend tilted me towards reducing my exposure and I’m quite happy with the decision.

      Best regards!

  9. Chad says

    Welcome to the BP family. I’m still holding onto my INTC shares. I still feel that they can still remain a profitable company that increases dividends. I have to side with their track record and R&D moat. I’m probably a contrarian because I’m thinking of adding to my position since everyone is selling.

    • says

      Chad,

      Nothing wrong with adding here. We all have different objectives and risk tolerances. For me, INTC just became too big of a position. Ideally, I’d like INTC to really be no more than 3% of my portfolio, if that. Right now it’s well under that and I’m happy.

      I hope you’re right regarding the future of INTC. The R&D is pretty huge, but I think shareholders are going to start demanding that something materialize out of that (big mobile progress).

      Take care!

  10. says

    You have sensible reasons behind your decision to sell INTC, which I respect. I am more optimistic about the company’s long-term growth prospects, but I do want to see some signs of earnings improvement in the short term. For that reason, I have opted to remain patient and keep holding into early 2014. A lack of an earnings rebound and a failure to increase the dividend in February might lead me to sell some shares.

    • says

      DGM,

      I’m with you. I’m giving the rest of my shares until early 2014. If the company doesn’t fundamentally improve materially and if the dividend isn’t raised I’ll be looking to let go of the rest of the position. INTC missed the early mobile train and now they’re playing catch-up. While they have the resources to play that game, it’s not one they’ll want to play indefinitely.

      I’ll be anxiously watching your decision as well.

      Best wishes.

  11. says

    Intel has an will be slower, in my opinion, however, it has a unique place in my portfolio as I do not have much expectation for it other then what it is (slow growth, a lot of dollars out for expansion/productivity, dividends slowly increasing). As for BP I am definitely holding that one long as well (along side CVX, XOM and some others). I must add I have stopped reading all the articles for and against INTC as a company or holding, there are just way too many. Best regards!

    • says

      Katz,

      I don’t read too many articles on INTC either. Like you, I feel the polarizing opinions do nothing to really add clarity to the situation. I formulate my own biases based on fundamental research. What I’ve seen isn’t pretty, but also not ugly enough for me to feel confident completely exiting the company right now. Early 2014 will tell us a lot more about the future of Intel’s mobile progress.

      Cheers!

  12. says

    I understand where you’re coming from. I sold half my shares a few weeks ago, yet still think the company can perform well. The problem is, I bought this stock for dividend growth and it is not performing as intended. I’m not into turnaround stories either.

    So I had to ask myself “do I really want to own $4,200 worth of this non performing stock?” “Do I want to build passive income with dividend growth or try for capital gains and be a total return investor?”

    If I was interested in being a total return investor, I’d go with Vanguard index funds…

    • says

      Compounding Income,

      I’m with you. I still think there is a good possibility of INTC righting the ship. I originally planned on holding all 240 shares until 1Q 2014 and reassessing from there. However, the 6th consecutive unchanged dividend was the impetus for me to reconsider my decision. I sold the same day and reinvested the proceeds into something cheaper with higher income. I really hate selling, but I didn’t want the exposure to INTC to be so large.

      I hear you in regards to being a dividend growth investor. The market is littered with potential turnaround stories. I’m interested in companies with clear secular growth, where dividend growth is funded by increasing sales, cash flow and earnings. My biggest fear with INTC is that they permanently missed the mobile boat and their decline will be secular, rather than cyclical. Again, I’ll hold the remaining 100 shares for the time being and plan on taking a fresh look early next year.

      Best regards!

    • says

      Rob,

      Interesting article. Thanks for sharing!

      I don’t necessarily think that changes my mind at all. It’s an interesting concept, but one wonders if it’s going to be gimmicky or not. Besides, I don’t think Intel is going to lose its grip on PC anyhow. It’s rather the lack of inroads into mobile computing that is worrisome. And this article has nothing to do with that. I think mobile computing is here to stay, so it’s imperative that Intel has success with their mobile platforms. We’ll see. :)

      Take care.

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