The company is on track to spend nearly $11 billion on capital expenditures. Only $2 billion has been earmarked for land and buildings. The rest of Intel’s dry powder will be focused on developing new products and gaining market share in the smartphone and tablet chip segment. Currently, that share sits at just 5.5% worldwide. With Intel Corporation (NASDAQ:INTC)’s might and money, there’s room to grow.
The Numbers Speak For Themselves
Another reason (and probably the main one) I find myself coming back to Intel is the company’s consistent financial performance.
Over the next year, sequential revenue is expected to grow by 6%, to $56.7 billion in 2014.
Earnings per share are projected to grow by nearly 11%, from an estimated $1.92 this year to $2.13 in 2014.
Even more astonishing is the rate at which Intel’s pile of cash is growing. The company is on track to increase its cash by 10% from $12.8 billion last year to $13.7 billion this year, and analystsexpect cash to grow even more significantly in 2014, to $17.9 billion.
As mentioned, Intel Corporation (NASDAQ:INTC) returns cash to shareholders in the form of dividends. The company has increased the common dividend an average of 12.6% annually over the past four years, from 12.8 cents per share each quarter to 22.5 cents, nearly doubling its payout.
Risks to consider: Intel’s business relies heavily on the traditional PC market. Although reports of the PC’s imminent demise are exaggerated, smartphones and tablets are replacing them as our go-to personal computing devices. The company is preparing for this by investing heavily in the mobile and tablet chip segment. Intel Corporation (NASDAQ:INTC) is also always at risk on a macroeconomic level, as the semiconductor sector is highly cyclical and subject to the health of the global economy. There are signs of economic growth in the U.S., but the European market is still soft, and there’s concern about the sustainability of China’s growth story. Intel Corporation (NASDAQ:INTC) seems to have taken these factors into consideration and continues to diversify its product mix while hoarding rainy-day cash.
Action to take –> A “Forever” stock like Intel Corporation (NASDAQ:INTC) is a natural fit in a well-constructed portfolio. The stock currently trades near $24 with a forward P/E ratio of 12.5. A 12-month price target of $31 makes sense. A 30% price appreciation would translate into a 24% increase of the forward P/E, which is reasonable based on the company’s consistency. Factoring in the 3.75% dividend yield would bump the total return up to nearly 34%.
Warren Buffett’s Top 5 Stocks
Buffett’s firm, Berkshire Hathaway, holds dozens of stocks. But these five make up 75% of its portfolio… worth $65 billion. Click here to get Buffett’s top 5 stocks plus his 16 latest buys, FREE.
This article was originally written by Adam Fischbaum and posted on StreetAuthority.
