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Listen "7: Intel (INTC) Dividend Growth Stock Passive Income Investment Analysis "
Episode Synopsis
On today’s Passive Income Investment Idea Episode we are analyzing Intel, ticker INTC. Intel is a High Quality, Wide Moat Company Selling at a Significant Discount to Fair Value.
Intel Corp is one of the world's largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It is also the prime proponent of Moore's law for advances in semiconductor manufacturing. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, recently acquiring Altera, Mobileye, Nervana, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas.
As of Oct. 28, 2020, Intel has an A+ S&P Credit Rating with a 32% LT Debt/Capital. Morningstar rates Intel as Wide Moat with a Negative Moat Trend, Standard Stewardship, and Medium Fair Value Uncertainty currently trading Significantly Undervalued at a 35% Discount to Fair Value and 5 Star Rating.
Analysis of the historical trends using FastGraphs shows that both Earnings and Operating Cash Flow have similar correlation with stock price over time. The historical Price to Earnings Multiple Range has been Wide, ranging from 12-18. Over the past 10 years, however, the range has been between 12-13. Currently the Blended PE is 9.34, an approximate 25% discount to the mid-point of the historical range. This translates to a 10.71% Blended Adjusted Earnings Yield. The consensus of 16 Analysts expect Intel to grow earnings an average of 1.62% per year between today and the end of 2022. The trailing 10 YR Earnings Growth has averaged 9% per year and traded at an average P/E ratio of 12.96. Therefore, the company is projected to grow Earnings Slower than in the past. As such, we should use the low end of the historical multiple’s range at best for valuing the company today. Assuming Intel grows Earnings at a rate of 1.62% annually and reverts to a valuation of 12 times Earnings, an investment today would return over 16% Annualized. The current price is $45.64 and our Target Sell Price based on Projected Earnings is $61. Moreover, you would lock in a Dividend Yield of 2.9% with a Low Payout Ratio of 25%. As a bonus, the Current and Trailing Twelve Month Buyback Yield is 9.47% for a Total Yield of 12.33%.
Additionally, Intel has High Operating Performance with 5 Yr Average Return on Equity of 22%, Return on Invested Capital of 16% and Net Margin of 23%.
Overall, here at the Business and Investing Sherpa, we are opportunistically adding more shares of this High Quality, Wide Moat Company to our Portfolio to generate Passive Income of around 3% in the form of Dividends while targeting a Total Annualized Return of 16% with a current target Sell Price of $61 between now and the end of 2022.
For an even better option, we are Selling Cash-Covered Puts to generate either guaranteed returns over 15% annualized or an even better entry position into Intel at a lower price. To learn more, be sure to take our Online Course about Selling Cash-Covered Puts.
***** If you’d like to get access to all of our Investment Analysis Reports along with all of our Online Courses on Investing for Passive Income and Total Return to Reach Financial Independence as well as our Monthly Portfolio Updates then simply go to BusinessAndInvestingSherpa.com and sign up for a PRO Membership. *****
Intel Corp is one of the world's largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It is also the prime proponent of Moore's law for advances in semiconductor manufacturing. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, recently acquiring Altera, Mobileye, Nervana, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas.
As of Oct. 28, 2020, Intel has an A+ S&P Credit Rating with a 32% LT Debt/Capital. Morningstar rates Intel as Wide Moat with a Negative Moat Trend, Standard Stewardship, and Medium Fair Value Uncertainty currently trading Significantly Undervalued at a 35% Discount to Fair Value and 5 Star Rating.
Analysis of the historical trends using FastGraphs shows that both Earnings and Operating Cash Flow have similar correlation with stock price over time. The historical Price to Earnings Multiple Range has been Wide, ranging from 12-18. Over the past 10 years, however, the range has been between 12-13. Currently the Blended PE is 9.34, an approximate 25% discount to the mid-point of the historical range. This translates to a 10.71% Blended Adjusted Earnings Yield. The consensus of 16 Analysts expect Intel to grow earnings an average of 1.62% per year between today and the end of 2022. The trailing 10 YR Earnings Growth has averaged 9% per year and traded at an average P/E ratio of 12.96. Therefore, the company is projected to grow Earnings Slower than in the past. As such, we should use the low end of the historical multiple’s range at best for valuing the company today. Assuming Intel grows Earnings at a rate of 1.62% annually and reverts to a valuation of 12 times Earnings, an investment today would return over 16% Annualized. The current price is $45.64 and our Target Sell Price based on Projected Earnings is $61. Moreover, you would lock in a Dividend Yield of 2.9% with a Low Payout Ratio of 25%. As a bonus, the Current and Trailing Twelve Month Buyback Yield is 9.47% for a Total Yield of 12.33%.
Additionally, Intel has High Operating Performance with 5 Yr Average Return on Equity of 22%, Return on Invested Capital of 16% and Net Margin of 23%.
Overall, here at the Business and Investing Sherpa, we are opportunistically adding more shares of this High Quality, Wide Moat Company to our Portfolio to generate Passive Income of around 3% in the form of Dividends while targeting a Total Annualized Return of 16% with a current target Sell Price of $61 between now and the end of 2022.
For an even better option, we are Selling Cash-Covered Puts to generate either guaranteed returns over 15% annualized or an even better entry position into Intel at a lower price. To learn more, be sure to take our Online Course about Selling Cash-Covered Puts.
***** If you’d like to get access to all of our Investment Analysis Reports along with all of our Online Courses on Investing for Passive Income and Total Return to Reach Financial Independence as well as our Monthly Portfolio Updates then simply go to BusinessAndInvestingSherpa.com and sign up for a PRO Membership. *****
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