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