Dividend Analysis: Intel Corporation (INTC)

By: ispeculatornew
Date posted: 04.12.2011 (5:00 am) | Write a Comment  (4 Comments)

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It’s a fact, many tech companies currently have loads of cash at their disposition and despite some investors asking to get that cash back, companies like Google (GOOG) and Apple (AAPL) have so far refused to play along and start paying out a dividend. There are companies that have started some of that cash to pay back shareholders and while Microsoft (MSFT) remains the big tech name to be mentioned by the media when it comes to tech companies that pay dividends, many have started buying up Intel Corporation which recently increased its dividend yield above the psychological 3% level.

What is Intel? It’s a company that design, manufactures and sells computer components such as microprocessors, chips, etc. These products have been around for a long time but as Intel remains the leader and as chips become available in different types of products such as cars, electronic devices, phones, etc, things are looking bright for Intel.For some of these segments, Intel did not have all of the expertise but in those cases, the company has generally been quick to react by either catching up or buying out these smaller competitors.

Without further wait, let’s take a deeper look into Intel (INTC) as a dividend stock based on the 20 things that we consider when analyzing dividend stocks.

Dividend Metrics

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No doubt, while the 3.02% dividend yield is not stunning, the growth over 1 and 5 years truly is and it certainly makes Intel a prime candidate to build a solid and growth oriented passive income portfolio.

Company Metrics

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Again, sales growth has been strong and while it’s not as impressive over 5 years, keep in mind that this covers a recession. I do expect the growth to remain at around 10% in the coming years.The earnings growth has been very solid, the P/E ratio is very reasonable, margins are improving… Sounding too good to be true? Wait, it gets better. The company has a payout ratio of around 30%, meaning it keep up the growth for many years even while it continues to put significant amounts into R&D (which is critical to remain competitive in the long term). The company has a strong return on equity and basically no debt…. In my opinion, the company metrics are even more impressive than the dividend metrics (which were already very solid).

Stock Metrics

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Industry Metrics

I would consider these to be strong as the industry continues to display growth and while there is some competition, it’s still a fairly good scenario for Intel. I do think the main threat remains having a smaller more efficient competitor that could innovate more efficiently than Intel. It has not happened so far but it’s certainly a threat.

Fit within your portfolio

Personally, I think Intel fits into just about any portfolio. There are few solid dividend payers in the tech sector and those that are run businesses that are vastly diffierent from Intel. As well, the company should perform above average in economic downturns given the growing demand for data processing in Western economies.

Overall

I think Intel (INTC) is one of the best dividend candidates we have looked at in some time both in the short and long term. It’s a great fit, a promising even though established company and can bring growth to your passive income as well.

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4 Comments

  1. Comment by Ravi Gupta — April 12, 2011 @ 7:14 am

    I’m not the best at stock analysis or evaluating companies. When I was going through school I would read up on technology and one thing you always hear about is rivalry between Intel and AMD. AMD would usually make the cheaper chip but Intel would almost always beat the AMD chip in terms of performance.

    -Ravi Gupta

  2. Comment by Open source portfolio — April 12, 2011 @ 3:13 pm

    a decent dividend yield for a tech company actually. I usually tend to avoid them because of the low return.

  3. Comment by IS — April 13, 2011 @ 6:08 pm

    @Ravi – No doubt yes, but it seems like Intel has remained on top of AMD:)

    @Open Source Portfolio – Have you considered MSFT too?

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