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Friday, 07/25/2003

Chip and Dip
By Nich Sheldon
INTC - Intel

Company Description

Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. Additional information about Intel is available at www.intel.com/pressroom.

[Source: Company Press Release]

Reasons to Invest:

Intel Corp. (NASDAQ:INTC) just celebrated its 35th birthday and we are honoring them by throwing them into the DripAdvisor limelight. Intel is the producer of semiconductor chips, supplies the computing and communications industries with chips, boards, systems and software that are integral in computers, servers, networking and communications products. Over the past six months revenues have rose 4% to $13.57 billion. Their net income rose 31% to $1.81 billion, and this is only part of the reason why we are highlighting Intel as this week's Drip of the Week.

While their revenues and net incomes are nothing shy of spectacular, INTC also offers a 0.33% dividend yield and an annual dividend of $0.08. Intel sees a 13.30 growth rate for their dividend percentage over the next three years and they are also projecting a 23.36 dividend yield growth rate over the next five years. This is good news for investors considering the higher the dividend percentage the fatter your pockets have a tendency of getting. Their profitability margin is an impressive 13.0% and this is another reason why we see it only fitting to highlight them.

In regards to price performance Intel is ranked 98 out of 99 in the Semiconductor index (SOX). This makes them the second biggest price mover in that index over the past 4 weeks. Over a 13 week period INTC was ranked 89th, which is considerably lower than its current price action ranking. One thing that DRIP investors should know is that if the price action is high in a given company then that means that investors are interested in the stock.

A quick look at INTC's chart and one will note that INTC has a been on a bullish rampage since last February, claiming more than 10 points over the past several months. The MACD is showing a bearish signal, which can mean a few things. One, the stock is going to begin selling-off, implying that now is not the time to get into shares of INTC. Two, the stock is ready for a dip before launching higher. Three, and my personal opinion, this is the time for DRIP investors to start watching shares of INTC, before actually investing in its shares.

What I mean is this, if the MACD is giving a bearish signal now, then why not sit patiently and watch INTC dip lower. After all, the stock is overextended and has been bullish for quite some time. If traders start selling-off INTC (bearish signal from the MACD) in order to take profits before a dip, then this could provide the right opportunity for DRIP investors to get into the stock at a lower cost. I see 22 as being short-term support for this chipmaker. If support can hold, more than likely we are going to see a bullish crossover on the MACD when this level is reached. If this is the case, DRIP investor could buy a DRIP plan for INTC at 22 as opposed to its current level of 24 and change, which makes this DRIP more appealing and less costly.

For instance, INTC offers DRIP plans at a minimum of $25 a month or up to 15,000 a month. If you went with a minimum purchase of $25 for your first month then you would in essence own one share at $22.00 (again this is if you wait until INTC dips to support of 22). Now you have three dollars left over, which goes towards buying your next share. This extra three dollars gives you fractions of the next share allowing for profitability on the one share you own and the fractional share you own as well. Whereas, lets say that the INTC closed at $25 today. If you went and ordered a DRIP plan through Intel you would own one share. There would be no fractional shares owned, and you would only be able to profit from that one share.

Intel has continued to keep analysts on their toes by beating earnings estimates three quarters in a row. INTC just announced Q2 earnings and beat estimates by one cent. The surprise factor this had on analysts was 7.7 percent and when you add this to their first quarter surprise percentage of 16.7% for beating earnings by two cents, this equals 24.4%. The percentage climbs even higher when you look at the Q4 of 2002, but I'm sure you can see where I am going with this.

Part of the reason for INTC's success is their manufacturing of faster processors. They developed the Pentium 4, better known as the P4, in November of 2000, and this chip enabled computers to move at 3.06 GHz per second. This was twice the speed of the P3 and a vast improvement in the chip. Intel is planning on introducing an even faster chip by the end of the fourth quarter. This new chip will work at 3.4 GHz or 3.4 billion cycles, of work calculation, a second. Not only is this great news for INTC but they have also stated that they it may be plausible to increase that speed to 3.6 GHz by the first quarter of 2004. However, faster chips do run hotter and a means of cooling down the chip may take longer.

Beating earnings for three consecutive quarters, talks about a newer faster chip than the P4 and increased revenues and income makes Intel one healthy looking DRIP plan. First things first, wait for this chip to dip before purchasing your own dividend reinvestment plan. Or in better words, buy low, sell high, but never invest money that you can't hang out to dry.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy:      6
Buy:            14
Hold:           12
Sell:            0
Strong Sell:     0


DRIP Information:

Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $25 to $15,000/month


Reinvestment Fees - 

Dividend investment fees: None
Cash investment fees: None
Auto reinvestment fees: None


Transfer Agent:

ComputerShare Investor Svcs.
800-298-0146


Corporate Headquarters:

2200 Mission College Blvd.
Santa Clara, CA 95052 
Phone: (408) 765-8080
Fax: (408) 765-9904



 
 

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