Intel: A rare blend of growth and income

Strong growth and a generous dividend boost the prospects for the chip-maker.

By TheStockAdvisors Nov 2, 2011 12:04PM
By Richard Moroney, Dow Theory Forecasts

This year, Intel (INTC) has rewarded investors with a rare blend of rapid growth, a generous dividend and impressive share-price action.

Several drivers suggest Intel can keep providing investors a few of their favorite things. Indeed, only three technology stocks in the S&P 500 Index yield more than Intel's 3.4%, and the company raised its dividend in August.

In seven of the past eight quarters, Intel delivered at least 18% sales growth. Intel's December-quarter revenue forecast calls for 28% growth.

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Intel shares have gained 17% so far this year, while the S&P 500 Index has retreated 3% and the index's technology sector has scratched out a 1% gain.

The acquisitions of McAfee and Infineon Technologies' wireless-semiconductor unit have contributed to Intel's growth spurt.

The September quarter renewed a familiar theme for Intel, as growth in emerging markets and large corporate business offset faltering demand in the North American and Western European consumer markets.

Intel said notebook shipments grew at a double-digit rate and reaffirmed expectations for an 8% to 10% rise in overall personal computer shipments this year.

Intel said China, India, Turkey and Indonesia all delivered double-digit PC growth in the quarter. China has become the largest PC market in the world, while Brazil ranks third.

Sales of components destined for mobile phones, tablets and netbooks (10% of revenue) surged 74% to $3.91 billion in the nine months ended September, reflecting the acquisition of the Infineon unit.

The company benefits from the need for more data centers to provide Internet service for smartphone devices. Intel's data-center unit (18%) delivered 20% higher revenue in the first nine months of 2011. 

Intel's growth could slow in 2012, with Wall Street projecting 4% higher per-share profits on 5% revenue growth.

But shares trade at just 10 times trailing earnings, 25% below Intel's peer group and 29% below Intel's own three-year average. The stock is a long-term buy.

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