Wednesday, 24 October 2012

Intel on Sale?


I’m not a big fan of technology stocks. I recently bought Dell because it is cheap, cheap and… cheap. Around the same time, I picked up a bit of Intel. Why? Have a look at the following:

INTC-N
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2000
$75.81
$29.81
$0.015
$0.015
$0.020
$0.020
$0.07
0.23%
0.09%
2001
$38.59
$18.96
$0.020
$0.020
$0.020
$0.020
$0.08
0.42%
0.21%
2002
$36.78
$12.95
$0.020
$0.020
$0.020
$0.020
$0.08
0.62%
0.22%
2003
$34.51
$14.88
$0.020
$0.020
$0.020
$0.020
$0.08
0.54%
0.23%
2004
$34.60
$19.64
$0.040
$0.040
$0.040
$0.040
$0.16
0.81%
0.46%
2005
$28.84
$21.94
$0.080
$0.080
$0.080
$0.080
$0.32
1.46%
1.11%
2006
$26.63
$16.75
$0.100
$0.100
$0.100
$0.100
$0.40
2.39%
1.50%
2007
$27.99
$18.75
$0.1125
$0.1125
$0.1125
$0.1125
$0.45
2.40%
1.61%
2008
$26.34
$12.06
$0.1275
$0.140
$0.140
$0.140
$0.55
4.54%
2.08%
2009
$21.27
$12.05
$0.140
$0.140
$0.140
$0.140
$0.56
4.65%
2.63%
2010
$24.37
$17.60
$0.1575
$0.1575
$0.1575
$0.1575
$0.63
3.58%
2.59%
2011
$25.78
$19.16
$0.1812
$0.1812
$0.210
$0.210
$0.78
4.08%
3.03%
2012


$0.210
$0.210
$0.225
$0.225
$0.87


2013


$0.225
$0.225
$0.225
$0.225
$0.90


Stock price and dividends are per calendar year.

11y ave
2.14%
1.31%
Dividends are listed in the quarter they were paid.

5y ave
3.85%
2.39%







3y ave
4.10%
2.75%







5y
$23.38
$37.69







3y
$21.93
$32.72







Super Cheap
$19.37


The table shows the 3 year average dividend yield to be 4.10% ((4.65% + 3.58% + 4.08%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current cash dividend of $0.90, one would have to pay $21.93 for a 4.10% yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 4.65%. Using the current dividend, that corresponds to a stock price of $19.37 today (see “super cheap” price in the table above).

Graham Price

Intel's 2009, 2010 and 2011 EPS were $0.77, $2.01 and $2.39. 3Y Ave EPS = $1.72.
Intel’s book value is $9.86.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $19.55

Cyclically Adjusted Price to Earnings Ratio

Intel’s 10Y Ave EPS = $1.20
CAPE = 10Y Ave EPS / Stock Price = $1.20/$21.46 = 17.88
A CAPE below 20 is very good.

Conclusion

These three metrics indicate that Intel is fairly valued. I guess one could argue undervalued, but I don’t think that’s the case.

On October 9th, I purchased 100 shares of Intel for $21.85/share + $9.95 commission. I plan to add another 100 shares if the price falls below the Graham price.

Don’t hesitate to leave comments, especially if I’m unclear. I aim at writing short articles that are easy to understand. Your feedback will help me do just that. If you'd like to see this type of analysis for a particular stock, ask and I'll do my best. 


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