Dividends. Most of all, retirees look for stocks that can provide income through dividends. Retirees want healthy payouts now and consistent dividend growth over time — as long as it doesn’t jeopardize the company’s financial health.
With those factors in mind, let’s take a closer look at Intel Corporation (NASDAQ:INTC).
| Factor | What We Want to See | Actual | Pass or Fail? |
|---|---|---|---|
| Size | Market cap > $10 billion | $105 billion | Pass |
| Consistency | Revenue growth > 0% in at least four of five past years | 2 years | Fail |
| Free cash flow growth > 0% in at least four of past five years | 2 years | Fail | |
| Stock stability | Beta < 0.9 | 1.02 | Fail |
| Worst loss in past five years no greater than 20% | (43.5%) | Fail | |
| Valuation | Normalized P/E < 18 | 11.84 | Pass |
| Dividends | Current yield > 2% | 4.3% | Pass |
| Five-year dividend growth > 10% | 14.1% | Pass | |
| Streak of dividend increases >= 10 years | 9 years | Fail | |
| Payout ratio < 75% | 39.5% | Pass | |
| Total score | 5 out of 10 |
Source: S&P Capital IQ. Total score = number of passes.
Since we looked at Intel last year, the company has kept its five-point score for the third year in a row. But the stock has suffered badly, falling 25% over the past year as many investors question its ability to remain an industry leader in the future.
Intel has done a bad job of managing investor expectations lately. In both of its two most recent quarterly earnings reports, the chip maker has failed to give strong enough guidance to inspire investors about its future. After hitting high-water marks for sales and net income in late 2011, Intel Corporation (NASDAQ:INTC) has suffered declines on those measures, as well as free cash flow.
The big issue for Intel Corporation (NASDAQ:INTC) is the extent to which competitors have swooped into the mobile space. ARM Holdings plc (ADR) (NASDAQ:ARMH) was never able to break far into the PC market, but its low-power-consumption chip architecture is ideally designed for battery-driven mobile devices. Intel has worked to catch up, but so far progress has been slow. Meanwhile, QUALCOMM, Inc. (NASDAQ:QCOM) has used its wealth of smartphone technology patents to become the dominant supplier of chips for smartphones, reaching out to both major smartphone platforms to drive sales across the industry.
Intel does have a couple of competitive advantages, though. Intel’s brand is much better-known among consumers than those of its rivals, so if the company does manage to get a strong mobile offering onto the market, it will have the marketing muscle to make people aware of it. Also, Intel’s moves to capitalize on data center demand have given it its best source of growth recently, and it should be able to continue moving in the right direction in that market.
For retirees and other conservative investors, the drop in Intel shares has boosted its dividend yield and made its shares even more attractively valued. The big question, though, is whether it can go beyond the slowly deteriorating PC business to find new opportunities. Only those who feel comfortable about those prospects should put Intel into their retirement portfolios.
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The article Will Intel Help You Retire Rich? originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm.
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