Buy Intel on this big dip

Its shares are down on soft PC sales, but don't ignore the stock's potential.

By Jim J. Jubak Sep 17, 2010 3:10PM

Jim JubakShares of Intel (INTC) have been hammered on news showing that PC sales to consumers have been soft in the current back-to-school quarter.


The shares changed hands just below $19 late Friday, about 7% above their 52-week low.


I think that sell-off ignores the company's strengths in other markets, such as servers, which show no signs of slowing growth, and it ignores the huge replacement cycle coming for PCs as businesses and consumers all make the purchases they put off during the recession.


Timing a product replacement cycle in an economy as tough to read as the current one isn't easy. But thanks to the drop in Intel's price, the stock comes with a very acceptable 3.4% dividend yield.

That means you'll get paid to wait for the replacement cycle to kick in -- and at a rate that's well above the current 2.75% yield on 10-year U.S. Treasurys.


A technology stock with great potential for capital appreciation and paying a 3.4% yield? Those don't come around very often (especially ones that have $18 billion in the bank, as Intel did at the end of the second quarter).


Intel is already a member of my Jubak's Picks 12-to-18-month portfolio. On Friday, I'm adding it to my Dividend Income portfolio as well. That complete portfolio is here.

 

At the time of this writing, Jim Jubak didn't own shares of any company mentioned in this post in his personal portfolio. 
 

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