Intel Corporation designs, manufactures, and sells integrated digital technology platforms worldwide. The company operates through PC Client Group, Data Center Group, Other Intel Architecture, Software and Services, and All Other segments. It offers microprocessors that process system data and controls other devices in the system; and chipsets, which sends data between the microprocessor and input, display, and storage devices, such as keyboard, mouse, monitor, hard drive or solid-state drive, and optical disc drives; system-on-chip products that integrate its processing functions with other system components, including graphics, audio, and video onto a single chip; wired network connectivity products; and wireless connectivity products. The company also provides mobile phonecomponents comprising baseband processors, radio frequency transceivers, and power management integrated circuits; and mobile phone platforms, such as Bluetooth wireless technology and global positioning systems receivers, software solutions, customization, and interoperability tests. In addition, it offers endpoint security, network and content security, risk and compliance, and consumer and mobile security software products for consumer, mobile, and corporate environments to protect systems from malicious virus attacks, as well as loss of data. Further, the company provides NAND flash memory products, which are used in solid-state drives. Intel Corporation sells its products primarily to original equipment manufacturers, original design manufacturers, and industrial and communications equipment manufacturers in the computing and communications industries. The company has a strategic collaboration with ZTE Corporation focusing on the Intel Atom Processor Z2580 platform. Intel Corporation was founded in 1968 and is based in Santa Clara, California.
Current Yield and Dividend Growth
Intel currently pays a dividend of $0.225 per quarter for a $0.9 annual dividend. At the close of market on Friday, September 20th INTC’s price per share was $23.77. This gives the stock a current dividend yield of 3.77%. Normally I look for a dividend yield of at least 3%, so I will be satisfied with this dividend yield from INTC.
In 2003, Intel paid an annual dividend amount of $0.08 per share. The dividend trend has been up each year as it now pays $0.90 annually per share. This gives INTC a 10 year annual compound dividend growth rate of 27.38%. Intel has increased its dividend for more than 9 years. Intel´s dividend growth rate has been good on last 5 and 3 years and even great on last 10 years, but has go down on last year. With over 11% growth rate it's still nice.
Intel's EPS has grown an average of 16.56% over the past 10 years, 12.54% in the past five years. The past three years, EPS has grown great 40.38%, but in the past year growth has been negative, -10.88%. Intel's EPS of development in recent years makes me very convinced, even last year it was negative. Analyst estimates for 5 years earnigs growth rate per annum are 7.25% (http://finance.yahoo.com/q/ae?s=INTC+Analyst+Estimates) If that will occur, investors will be pleased.
Intel's net income has increased by an average of 13.44% over the past 10 years, 9.55% in the past five years and even 36.06% in the past three years. Net income, is however clearly decreased in last year being negative in 2012 (-14.97%). Net income trend looks similar to the EPS trend. Net income development in last years also makes me a little suspicious that Intel is a good investment for the future.
Intel's revenue has increased 7.14% over the past 10 years, 6.83% in the last 5 years. In the last 3 years, profits have grown comfortable 14.85%, only last year, revenue fell by negative -1.22%. If Intel can turn the revenue growth rate again back up, investors will sure be pleased.
Intel`s amount of shares has go down nicely, except on year 2007 those increased and on year 2010 those stayed about on same amount, but after that has continue go down. That I like, because less shares outstanding, my shares are giving me a larger portion of the earnings.
Intel's dividend payout ratio has been in the past 10 years between 35-48%. This means that Intel will distribute less than half of the profits to shareholders, and put more than half of the new investment, as well as increases the value of shares through share repurchases. With current dividend yield, It suits me very well.
Intel's ROE has been around 20% over the past 10 years, which on my opinion are okay.
Current ratio measures the company's ability to meet short-term obligations. Intel has current ratio 2.43 at the end of 2012. This means that the funds will be able to cover 243% of current liability obligations. I usually like the current ratio is greater than 1, so Intel looks very good in this case.
Net Profit to long term debt
This number tells me how many years it will take to pay off the current long term debt of the company by using all net profit into it. I want this ratio to be less than 5, because the company is able to pay for all long-term debt from less than five years and on my opinion then company don´t have too much debt. Intel`s long term debt has been under 5 times net profit on last 10 years, even it has grown up fast on last years. In the last 10-year average has been excellent 0.48, last year it was still very good 1.39.
To found out share fair value I mainly use six different methods. (http://www.passive-income-pursuit.com/search/label/stock%20valuation%20method).
Average P/E Ratio
Intel`s current P/E are 12.8, which are close to it`s historical 5 years average low (10.91) and also lower as 10 years average low (14.00). By calculating using estimated EPS 1.87 for year 2013 and the average 5-year low P/E ratio shares fair value will be $ 20.41. Using the 10-year average low P/E ratio, fair value will be $26.18.
Average Dividend Yield
Intel`s current annual dividend are $0.9. At the close of market on Friday, September 20th INTC’s price per share was $23.77. This gives the stock a current dividend yield of 3.79%. Average 5 years high dividend yields has been 4% and average 10 years high dividend yields has been 3%. Those dividend yields gives share fair value $21.05 for 5 and $31.05 for 10 years.
Average P/S Ratio
Intel´s current P/S ratio are 2.23 with revenue estimates for year 2013 (52.96B). Average 5 years low P/S ratio are 1.93 and average 10 years low P/S ratio are 2.56. By calculating using estimated revenue for year 2013 and the average 5 years low P/S ratio fair value will be $20.50. Using the 10 years average low P/S ratio, fair value will be $27.20.
Discounted Cash Flow
Analyst estimates for 5 years earnings growth rate per annum are 7.25%. I will use on my calculation 66% of that, which are 4.79%. Then I assume that continue growth after 5 years will be 3%. I use discount rate 10% and EPS $1.85. That will give me share fair value $29.37.
SFV of Future EPS
Dividend Discount Model
Intel`s current annual dividend are $0.9. I assume that Intel will be able to grow dividends for the next 3 years at the lowest of the 1, 3, 5, or 10 year growth rates or 15%. In this case that would be 11.2%. Then I assume that after 3 years grow rate will be 5%. To calculate the value I used a discount rate of 10%. That will give me share fair value $22.28.
SFV of Future Dividends
Future PriceIntel has EPS 1.85 (ttm). When I calculate Intel`s future price with analyst estimate for 5 years EPS growth and using low P/E ratio last 5 years, I came for price $28.70.
Intel are on my opinion a good company and I will keep some shares of it in my portfolio. Based on my analysis, I think Intel are currently fairly valued, and I am not worried at this time to own shares of Intel. If the price would fall down to near $20, then I could add some more INTC to my portfolio. If Intel is able to turn revenue, net income and EPS growth back to good form, the situation will come much better.
Disclosure: I`m long INTC.