Market Overview

Intel Dividend Boosted by 7.1%

It was revealed on Monday that Intel (NASDAQ: INTC) has increased its quarterly dividend 7.1% to 22.5 cents. This increase comes as the company anticipates growth in the cell phone market, and it is hoping for record revenues in 2012.

CEO Paul Otellini said in a statement that, "Strong demand in our core business and significant progress in smartphones will help drive the gains. This latest dividend increase is one more example of our commitment to return cash to our stockholders.”

The company's dividend has increased three times in the past year and a half, as it attempts to take advantage of the growth in computing through mobile devices. Still, shares fell 0.3% to $27.81 on Monday. The stock had, however, climbed 15% in 2012 before Monday.

In a word, Intel has a solid underlying business and significant market share. The company also has sustainable long-term growth rate. Long-term, dividend investors should increase their long positions. On the other hand, as the risk of the business is relatively low, the excess return opportunity is hard to generate.


ACTION ITEMS:

Bullish:
Traders who believe that Intel will keep rising might want to consider the following trades:
  • According to Paul Otellini's statement, Intel expects to increase revenue significantly in the future due to growth in smartphone business. Using DDM(Dividend Discounted Model), INTC will have a higher target price. People who are long-term investors and love dividends should buy more INTC.
  • Intel's annual revenue growth rate is 2% and its profit margin is 23.16%. These figures indicate that Intel's business is very solid, sustainable, and profitable.
  • Enterprise Value/EBITDA is as low as 5.72 indicates Intel is currently undervalued and has more growth room.
Bearish:
Traders who believe that the company will start falling may consider an alternate positions:
  • As a mega cap company with market cap equals $139.34 billion, Intel is held by so many index funds, which means its price is stable and hard to generate excess returns.
  • Competition pressure from Texas Instruments, Inc. and Advanced Micro Devices, Inc. has been increased since these two competitors also enjoy the benefits of hot smartphone market.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Follow me @BCallwood.

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