Buy Intel on This Big Dip

09/17/2010 3:10 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Shares of Intel (Nasdaq: INTC) have been hammered on news showing that personal computer (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 selloff 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 ten-year US Treasuries.

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, September 17, I'm adding it to my Dividend Income portfolio as well. See that complete portfolio here.

Full disclosure: I don’t own shares of any company mentioned in this post in my personal portfolio.

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