I just read that this morning, Tom, and was considering how to reply!
Ashraf Eassa writes a lot over at SA about Intel and really seems to know what he's talking about. I want to be comforted by this new article telling us not to panic -- YET -- about INTC not raising the dividend, but am not. His essential points are that INTC has never been a company to raise by the calendar every year, and that rather they have raised in the past when business conditions warrant, and that current business conditions do not right now warrant a raise. He does not explicitly call this responsible stewardship by management. Rather, he suggests that a raise right now would seem like a "totally desperate" move to assuage investors rather and hence would be viewed as a negative. He concludes expressing his opinion that Q3 will "mark the beginning of the turnaround" and that Q4 will be the real tell. He says it this way: "If Q3 comes in all-right and if the Q4 guide is strong, I fully expect a dividend increase along with the results. If not, then lack of a dividend increase will be the least of Intel investor worries."
There are a couple of strong reasons I don't buy this story line. First, I am an INTC investor, and I would not have seen a Q3 raise as "desperate." I would have been immensely comforted by a Q3 raise. Now, I suppose if it had been an unusually large raise, it would have seemed suspicious in the way that Eassa suggests. But, especially in light of the currently reasonable payout ratio, a small raise would have said to me "yes, current business conditions do not warrant a large, or even typical raise, but we believe in out pipeline and products are not worried about where things are headed."
Second, the article suggests that all of us -- including Intel management -- will just have to sit and wait to see what Q3 and Q4 bring. Well, we're well into Q3 right now, and Intel is working with hardware companies right now to sell chips that will be in products to be sold in Q4 and beyond. You're telling me Intel does not already have a pretty solid idea of what Q3 and Q4 are going to look like? Or at least whether they will mark the beginning of the turnaround or comeback? They just reduced full year 2013 guidance. Combined with the dividend news, this says to me that the turnaround is not nearly so imminent as Eassa hopes.
This morning, more than ever, I am considering lightening my allocation of INTC. I would not consider this a panic sell. It is overweight in my portfolio anyway, so I would just trim that back some, maybe unload 25 percent of my holdings. My average price per share is $19.35, so I would not be taking a loss. (Nostalgia moment: Just looked back through my spreadsheet -- I bought my first pile of INTC in march of 2009 at $12.20 per share back in March 2009.) I also wouldn't mind having a little extra dry powder at hand, and this move would help achieve that. I have some risk plays in my dividend growth portfolio, but I've never considered INTC to play that role in my holdings.
I've made no decisions yet, but will keep you all posted!
Ashraf Eassa writes a lot over at SA about Intel and really seems to know what he's talking about. I want to be comforted by this new article telling us not to panic -- YET -- about INTC not raising the dividend, but am not. His essential points are that INTC has never been a company to raise by the calendar every year, and that rather they have raised in the past when business conditions warrant, and that current business conditions do not right now warrant a raise. He does not explicitly call this responsible stewardship by management. Rather, he suggests that a raise right now would seem like a "totally desperate" move to assuage investors rather and hence would be viewed as a negative. He concludes expressing his opinion that Q3 will "mark the beginning of the turnaround" and that Q4 will be the real tell. He says it this way: "If Q3 comes in all-right and if the Q4 guide is strong, I fully expect a dividend increase along with the results. If not, then lack of a dividend increase will be the least of Intel investor worries."
There are a couple of strong reasons I don't buy this story line. First, I am an INTC investor, and I would not have seen a Q3 raise as "desperate." I would have been immensely comforted by a Q3 raise. Now, I suppose if it had been an unusually large raise, it would have seemed suspicious in the way that Eassa suggests. But, especially in light of the currently reasonable payout ratio, a small raise would have said to me "yes, current business conditions do not warrant a large, or even typical raise, but we believe in out pipeline and products are not worried about where things are headed."
Second, the article suggests that all of us -- including Intel management -- will just have to sit and wait to see what Q3 and Q4 bring. Well, we're well into Q3 right now, and Intel is working with hardware companies right now to sell chips that will be in products to be sold in Q4 and beyond. You're telling me Intel does not already have a pretty solid idea of what Q3 and Q4 are going to look like? Or at least whether they will mark the beginning of the turnaround or comeback? They just reduced full year 2013 guidance. Combined with the dividend news, this says to me that the turnaround is not nearly so imminent as Eassa hopes.
This morning, more than ever, I am considering lightening my allocation of INTC. I would not consider this a panic sell. It is overweight in my portfolio anyway, so I would just trim that back some, maybe unload 25 percent of my holdings. My average price per share is $19.35, so I would not be taking a loss. (Nostalgia moment: Just looked back through my spreadsheet -- I bought my first pile of INTC in march of 2009 at $12.20 per share back in March 2009.) I also wouldn't mind having a little extra dry powder at hand, and this move would help achieve that. I have some risk plays in my dividend growth portfolio, but I've never considered INTC to play that role in my holdings.
I've made no decisions yet, but will keep you all posted!