Friday, December 21, 2012

Stock Analysis of Intel


Intel Corporation (INTC) designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan. This dividend achiever has paid dividends since 1992 an increased them for 10 years in a row.

The company’s last dividend increase was in July 2012 when the Board of Directors approved a 7.10% increase to 22.50 cents/share. The company’s peer group includes Altera (ALTR), Xilinx (XLNX) and Advanced Micro Devices (AMD).


Over the past decade this dividend growth stock has delivered an annualized total return of 4.50% to its shareholders.


The company has managed to deliver a 20.10% average increase in annual EPS since 2002. Most of the increase came over the past two years however. Before that, earnings were following a rollercoaster pattern. Analysts expect Intel to earn $2.10 per share in 2012 and $2.03 per share in 2013. In comparison, the company earned $2.37/share in 2011.

The return on equity has closely followed the trends in earnings per share over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 25.60% per year over the past decade, which is higher than the growth in EPS.

A 25% growth in distributions translates into the dividend payment doubling every three years on average. If we look at historical data, going as far back as 1994, one would notice that the company had managed to double distributions every three years on average.

The dividend payout ratio has increased from 17.40% in 2002 to 72.70% in 2009, before reaching a more sustainable 32.60 % in 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Intel is trading at 8.80 times earnings, yields 4.50% and has a sustainable distribution.

Full Disclosure: None

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