Time To Dump Intel Corp ($INTC) From The USDP?

By: ispeculatornew
Date posted: 08.07.2013 (3:00 am) | Write a Comment  (1 Comment)

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$INTCOne if not the most important project that I write about on this blog is my passive income journey where I try to build passive income streams that can then help me become financially independent. As most of you know, the Ultimate Sustainable dividend portfolio (USDP) is a core part of that strategy and it is build mostly around strong long term growth. So far, none of the holdings have ever decreased their dividend and while I know it will happen at some point, I’m hoping to get rid of those names BEFORE that happens.

Naturally, I try to stay informed as best as possible and I’m currently very concerned about one of my holdings; Intel Corp. Why?

If you remember, I try to hold names that respect the 7-7-7 rule; 7% of average growth in the past 5 years for sales, earnings and dividends. Intel is doing very poorly in each of these metrics. I bought Intel for a variety of reasons but being a tech stock, I expected growth to remain strong which has not been the case. Let’s take a look at a few key charts:

INTC Dividend Chart

INTC Dividend data by YCharts

INTC Revenue Quarterly Chart

INTC Revenue Quarterly data by YCharts

INTC EPS Diluted Quarterly Chart

INTC EPS Diluted Quarterly data by YCharts

You can also see the numbers. Things have not been going very well. Why? A variety of reasons such as competition, tougher economic times, etc. The bigger worry though is the fact that Intel is on the bad side of a very strong trend. Intel builds chips that power many things but mainly pc’s. The strong growth in Mac and the surge of mobile devices and tablets where Intel is much weaker is a very worrying sign and unsurprisingly, it has struggled to keep up.

Let’s look at the main numbers:

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INTC

Intel did end up not raising its dividend and its unclear when the next raise will come. To be clear, I don’t expect that dividend to decrease anytime soon. The company has little debt, is still making much more than its paying, etc. But I want to get out before such questions start becoming a serious concern. I remain undecided but I’ll try to get to some decision before the next USDP update. One issue that I would encounter if I do remove INTC is that there are very few other tech stocks that would be a good fit to replace it. There is also a bit of downside risk in terms of overall yield. INTC pays almost 4% dividend, mostly because the stock has performed so badly and at the growth levels I’m looking for, it’s almost impossible that I’d find a name that offers a 4% yield. A small drop would be worth it over the longer term of course though.

Do any of you hold Intel? If so, what are your thoughts?

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1 Comment

  1. Comment by Chris — August 7, 2013 @ 11:06 pm

    Even though the market currently does not trust Intel too much, I don’t think it’s time to dump. The last earnings report listed the decline in CPU sales at almost half of the decline in PC shipments. Also, Intel can at least partially offset this decline by the growth in Cloud infrastructure, and the associated CPU sales for servers and network equipment.

    Going forward, the new Atom CPUs for tables and mobiles will ensure growth in the mobile world (Intel’s marketing department will take care of that), while the new Haswell CPUs and 20/14mn manufacturing process will keep the competition at a distance.

    New initiatives like the NUC, Intel TV, Wind River, and additional security features through McAffee + Haswell will do the rest for future growth.

    Btw – you list the strong growth in Mac as a downside. Every Mac since 2006 has had an Intel CPU inside 😉

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