Don’t Lose Sleep Over Microsoft Corporation (MSFT)!

Advanced Micro Devices, Inc. (NYSE:AMD) had sales of $6.5 billion in 2010, with only $5.4 billion of sales in 2012. This only means that Intel is stealing its market share. Perhaps, that’s the direct result of AMD’s relatively low investment in R&D. In 2012, AMD invested only $1.3 billion in R&D; that’s almost one eighth of what Intel invested in the same year. Now, who do you suspect will come out with quicker, more advanced chips in the year 2020 — Advanced Micro Devices, Inc. (NYSE:AMD) or Intel?

Reason number two: Shareholder rewards

Last year, Intel paid $9.2 billion in dividends and share repurchases. This amounts to roughly 50% of its annual cash from operations. That’s a phenomenal shareholder yield which assures that your slice of the Intel pie is growing larger, and faster. Contrast that to AMD, which pays no dividends and only spent $14 million in 2012 acquiring its shares.

Microsoft Corporation (NASDAQ:MSFT), for example, paid $9.5 billion in dividends and share repurchases last year, which equates to 30% of the company’s annual cash flow from operations. That’s lower than Intel’s, but still remarkable.

Reason number three: Fortress balance sheet

Intel finished 2012 with more than $18 billion in cash and investments and around $13 billion in debt. It could pay off all its debts and still have billions left over. With an annual cash flow stream of $7.9 billion, this should come as no surprise to you. That makes Intel one of the safest stocks in the world.

AMD, on the other hand, has more than $2 billion in debt and less than $1 billion in cash and investments. That’s a far cry from Intel. Mr. Softy ended the year with more than $63 billion in cash and investments and around $11 billion in debt. No wonder Microsoft has a higher “credit score” than that of the U.S. government.

My Foolish conclusion

Investors in Intel and Microsoft Corporation (NASDAQ:MSFT) can sleep tight. A few weeks from now, no one’s going to remember their earnings miss. What people will remember is their superb cash flow generation and high dividends. That’s because fundamentals always rule at the end. Just keep your fingers off the “Sell” button in the meantime.

The article Don’t Lose Sleep Over Microsoft! originally appeared on Fool.com and is written by Shmulik Karpf.

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Microsoft. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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