Competition
Coming out of the depression of 2008-09, would you have done well buying Intel, or any of its competitors, or just sticking with the S&P 500 itself? The answer is below.
The clear winner is ARM Holdings plc (ADR) (NASDAQ:ARMH). Nothing else even comes close. Intel’s gain of 80.5% sounds great, but really not so much considering that the S&P 500 was up 94.7%.
Advanced Micro Devices, Inc. (NYSE:AMD) and NVIDIA Corporation (NASDAQ:NVDA)? Forget about it. These two chip makers really aren’t worth owning. AMD used to be a significant competitor to Intel. Now it languishes with a $2 billion market cap and scuffles along by clinging to low-margin opportunities. Its market share in desktops has collapsed and its attempt at competing directly with NVIDIA Corporation (NASDAQ:NVDA) has been a dud. NVIDIA has been more successful than Advanced Micro Devices, Inc. (NYSE:AMD) because it has been able to dominate the graphics processing market, while also getting a stronger hold on the mobile computing market with lower power usage chips. NVIDIA Corporation (NASDAQ:NVDA) has more life than Advanced Micro Devices, Inc. (NYSE:AMD), but both will need a big kick to send their stocks higher.
On the other hand, ARM Holdings plc (ADR) (NASDAQ:ARMH) has become a considerable foe to Intel. ARM capitalized on the shift to mobile technology in a significant way by making chips that could handle low-energy needs, and also be powerful enough and be made at the right price point. ARM doesn’t make the chips, but instead develops the technology for the chips. ARM Holdings plc (ADR) (NASDAQ:ARMH) likely has a bright future ahead of it and will likely be Intel’s biggest competitor in some of the markets where they overlap.
Dividend
One of the big benefits of owning Intel has been its high dividend. In fact, you can pretty well use the dividend yield to determine when to buy. The chart below shows the dividend yield and stock price over the past couple years. Any time the dividend gets above roughly 3.5%, it’s been a perfect buying opportunity.
Intel’s dividend is also very much safe. They generated $4 billion of cash from operations in Q1 2013 and paid out only $1 billion in dividends.
Bottom line
As I mentioned in the beginning, Intel has been a battleground stock for bulls and bears. The PC industry is clearly declining. The bears will point directly to that as Intel’s demise since it’s still its largest revenue driver. The bulls look to the future possibilities that could be driven by Haswell, extra production capacity, potential for an Apple Inc. (NASDAQ:AAPL) partnership, etc. All of these remain as possibilities and/or rumors.
For now, I prefer to wait until we hear more on the Haswell release and the results from the next couple quarters. The long-term story for Intel is yet to be told. Investors should wait to see how the Haswell release and the coming quarterly results play-out before piling into the stock.
The article Intel’s Not Dead Yet originally appeared on Fool.com is written by Dave Zaegel.
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