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INTC – Intel Stock Is in Trouble Come 2014

Intel is becoming a manufacturer, not a tech leader

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Intel (INTC) was my pick for our best stocks of 2013 contest at InvestorPlace, and things started the year just fine. INTC raced up about 30% in just a few months, and with a nice dividend yield the investment was sitting pretty.

intc-stock-intelHowever, things have gotten rocky in the second half of the year. And though Intel stock is still up about 20% in 2013, this tech giant is not a safe bet for the new year — so any investors camping out in INTC should take the money and run.

And if you’re looking for new investments in the new year, steer clear of this tech stock.

Here’s why Intel is a bad bet:

Mobile Woes Continue for Intel Stock

It’s no secret that Intel has been late to the mobile game, with its designs lagging behind rivals like ARM Holdings (ARMH), Qualcomm (QCOM) and Broadcom (BRCM). But the problem lately has been that INTC continues to spend big to prime the pump with very limited results thus far — and no immediate impact on the bottom line.

A new line of low-power chips that Intel is calling Bay Trail seems to be winning over some manufacturers; however, the line still is limited to also-rans — tablets from Hewlett-Packard (HPQ) and Toshiba (TOSBF), for instance, without a single big-name smartphone like the Apple (AAPL) iPhone.

Intel is investing big in mobile, as it should, but none of those investments are even close to paying off in 2014 based on this year’s slow progress.

Furthermore, mobile chips simply don’t command the same margins as the old PC chips did. Meaning that if Intel is getting a fifth or a tenth of the profits on these mobile chip lines, INTC needs to sell 5x to 10x more product to hit the same numbers.

That compounds the need for mobile growth, and the impact that the transition will have on INTC stock in 2014.

Intel Dividend Growth Slowing

One of the most compelling reasons to invest in INTC is its massive 3.7% dividend yield — a heck of a number, especially for a tech stock. But Intel’s dividend growth has slowed immensely, so there’s no guarantee that income stream is going to get any bigger.

Consider that in 2003, INTC stock paid 2 cents per quarter. It now pays 22.5 cents — a 1,150% increase in just 10 years! But before you get all excited, remember that the most recent increase to Intel dividend payments was from 21 cents to 22.5 — a miserly 7% hike.

The rate of dividend growth has been slowing for some time at Intel. That’s not a death knell, of course, but if the stock continues to go nowhere, then you have to wonder what INTC has to offer beyond the current yield.

And if the stock goes lower? Well, even a 3.7% dividend yield in INTC stock is cold comfort.

Article printed from InvestorPlace Media,

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