08-03-2013, 12:56 PM
So INTC is one of the largest holdings in my dividend growth portfolio. They’ve taken a lot of heat over the last couple of years for missing the boat on mobile, and earnings have certainly suffered. The stock price spent a lot of 2012 in the mid to high 20s, even flirting with $30 briefly, if I recall correctly, before marching steadily down to almost $19. It bounced back some in the early part of 2013, back to $25, as hopes increased for their new chips to get them into mobile. Now back to about $23 as earnings stay stale and guidance has been revised downwards.
I took all of this in stride, without worry. Intel is a behemoth in the industry, with first rate talent, solid management, a good product pipeline, a plan to get into mobile and thereby to get earnings going in the right direction again. Aside from earnings, INTC’s metrics as a dividend growth stock are pretty darned solid as well. A very nice yield near 4 percent, a low p/e ratio (around 12), a reasonable payout ratio (below 50 percent), good dividend growth over the last 5 years, and reasonably good streak of annual dividend raises.
Despite all of the naysayers, my faith in Intel has never really been shaken, until the recent dividend announcement. For the first time, I am questioning my large allocation to INTC. They’ve raised the dividend in Q3 for the last couple (or few) years, but they just announced the Q3 dividend – unchanged from the previous 4 quarters at 22.5 cents. This is pretty concerning to me. It sends a strong signal that management is not confident that earnings will be back on track any time soon.
It was, rightly, pointed out to me that while Intel has a good streak of annual raises going (9 years, I think), they really haven’t always made the raise in Q3. That has only been true in recent years. The timing of the raises has been somewhat erratic in the last decade. Furthermore, even if we did not get a raise until sometime in 2014, their streak would not be in jeopardy, the way I measure. I look at calendar year totals, so in 2012 INTC paid out 87 cents per share, and in 2013 (even with no raise), they’ll pay out 90 cents per share. Any raise in 2014, however paltry, will suffice to keep the streak going, as a technical matter anyway.
Nonetheless, it is hard to avoid thinking that if management were confident in the way things were headed, they would not mess with shareholder expectations like this and would have raised the Q3 dividend, even if only by a small amount. I’m going to give them the benefit of the doubt and am not seriously considering selling any of my shares right now. But they have certainly shaken my faith for the first time.
What do others think?
I took all of this in stride, without worry. Intel is a behemoth in the industry, with first rate talent, solid management, a good product pipeline, a plan to get into mobile and thereby to get earnings going in the right direction again. Aside from earnings, INTC’s metrics as a dividend growth stock are pretty darned solid as well. A very nice yield near 4 percent, a low p/e ratio (around 12), a reasonable payout ratio (below 50 percent), good dividend growth over the last 5 years, and reasonably good streak of annual dividend raises.
Despite all of the naysayers, my faith in Intel has never really been shaken, until the recent dividend announcement. For the first time, I am questioning my large allocation to INTC. They’ve raised the dividend in Q3 for the last couple (or few) years, but they just announced the Q3 dividend – unchanged from the previous 4 quarters at 22.5 cents. This is pretty concerning to me. It sends a strong signal that management is not confident that earnings will be back on track any time soon.
It was, rightly, pointed out to me that while Intel has a good streak of annual raises going (9 years, I think), they really haven’t always made the raise in Q3. That has only been true in recent years. The timing of the raises has been somewhat erratic in the last decade. Furthermore, even if we did not get a raise until sometime in 2014, their streak would not be in jeopardy, the way I measure. I look at calendar year totals, so in 2012 INTC paid out 87 cents per share, and in 2013 (even with no raise), they’ll pay out 90 cents per share. Any raise in 2014, however paltry, will suffice to keep the streak going, as a technical matter anyway.
Nonetheless, it is hard to avoid thinking that if management were confident in the way things were headed, they would not mess with shareholder expectations like this and would have raised the Q3 dividend, even if only by a small amount. I’m going to give them the benefit of the doubt and am not seriously considering selling any of my shares right now. But they have certainly shaken my faith for the first time.
What do others think?