Intel Corporation (INTC) designs, manufactures, and sells integrated circuits for computing and communications industries worldwide. It offers microprocessor products used in desktops, workstations, servers, embedded products, communications products, notebooks, netbooks, mobile Internet devices, and consumer electronics. It also offers chipsets with embedded designs for industrial equipments, point-of-sale systems, panel PCs, automotive information/entertainment systems, and medical equipment. INTC is not a dividend achiever. It has been paying growing dividends for last 5 years. I had shortlisted INTC for more analysis in my list of potential for dividend growth investments and opportunities for technology dividends. Keeping with that, my objective here is to analyze if INTC is a good dividend growth stock and how it will rate on my scale of risk-to-dividends. Risk Parameter Calculation Fair Value Calculation Conclusion
Here I am looking at trends for past 8 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts and data summary are shown in images below.
Here I use the corporation’s financial health to assign a risk number for measuring risk-to-dividends. The risk number for risk-to-dividends is 2.3. This is a medium risk category as per my 3-point risk scale. The increased payout factor and erratic EPS makes it a medium risk to dividends.
Quality of Dividends
This section measures the dividend growth rate, duration of growth, consistency over a period of past five years.
This section determines what price I should pay to buy a given stock
• Net present value (NPV) price based on 15 year DCF: $6.2
• Average high yield price calculated based on past 10 years: $23.8
• Pricing based on past 8 year relative price-to-earnings ratio. $23.6
• Pricing based on price-to-earnings ratio of 12: $9.3
• Graham number: $10.4
The range of fair value is calculated as $10.5 to $14.7. This is determined by taking average (for high value) of above five parameters and then subtracting it with half the standard deviation (for low value).
INTC continues to remain un-challenged leader in the computing microprocessor market segment. Its sole challenger, AMD keeps raring its head every once in a while. However, it has not seen any sustained challenge. On occasions this makes the company complacent and ignoring what the markets wants.
I like INTC technological driven supremacy in its product segment. It has been raising dividends for last five years only. This growth seems be due to historically low payout factor instead of growth in EPS. The stock’s current risk-to-dividend rating is 2.3 (medium risk). I will continue to hold my existing INTC stock in my dividend portfolio. However, I will not be adding to my INTC position.
Full Disclosure: Long on INTC.
INTC is not a dividend achiever. It has been paying growing dividends for last 5 years. I had shortlisted INTC for more analysis in my list of potential for dividend growth investments and opportunities for technology dividends. Keeping with that, my objective here is to analyze if INTC is a good dividend growth stock and how it will rate on my scale of risk-to-dividends.
Risk Parameter Calculation
Fair Value Calculation