Intel a Case in Point For Value and Dividend Investors

by Richard Band | November 8, 2012 8:30 am

intel Intel a Case in Point For Value and Dividend InvestorsIn the technology sector, Intel (NASDAQ:INTC[1]) offers compelling value at only 10X estimated year ahead profits and a hefty 4.2% yield, and I believe investors should take a long hard look at the battered and bruised chip maker.

Sure, I’m aware of the concerns some analysts have voiced — that the chip maker may, for instance, have been a little slow to re-engineer its products for the smartphone arena.

However, INTC has faced, and overcome, such challenges many times before. Remember, this is an outfit that spent $9.4 billion on R&D in the past 12 months alone — a stunning 17 cents of every sales dollar. You don’t suddenly turn into a dinosaur when you’re innovating at that pace.

What’s more, Intel—unlike, say, Hewlett-Packard (NYSE:HPQ[2])— can afford to spend “whatever it takes” to muscle past the competition.

Cash on hand outweighs all debt, and INTC spouts enough fresh cash every quarter to cover capital spending by almost a 2:1 margin. Small wonder the company has been able to double its dividend[3] over the past five years. Worry about other tech stocks going down the tubes, but not Intel!

What to do now: Buy INTC at $24 or less. I’m promoting the stock to our Incredible Dividend Machine where Intel will replace electric utility Exelon (NYSE:EXC[4]). If you own EXC, you should hang on to it.

However, I expect Intel to post a stronger total return — in the neighborhood of 20% — over the next year. The company normally pays dividends on or about the first day of March, June, September and December.

Endnotes:
  1. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  2. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  3. double its dividend: http://slant.investorplace.com/2012/10/why-i-just-bought-intel-stock-and-why-you-should-too/
  4. EXC: http://studio-5.financialcontent.com/investplace/quote?Symbol=EXC

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