Intel: Is "Old" Tech New Again?
11/06/2017 5:00 am EST
Investors often view “old” tech companies as the stodgy leaders of yesteryear that pay dividends and have minimal growth rates. One of those “old” tech companies is Intel (INTC), notes dividend reinvestment expert Chuck Carlson, editor of DRIP Investor.
The company is still viewed primarily as a provider of chips for the PC market. That is about the least sexy thing you can be when it comes to tech.
The reality, however, is that Intel is remaking itself, pushing into higher-growth markets. Wall Street is starting to catch on to the transformation at the company, but there is still plenty of upside remaining in these shares.
Intel is a leading provider of integrated circuits. Roughly three quarters of sales come from overseas. Intel has always been a big player in chips for the PC and related markets.
This market hasn’t exactly been at the epicenter of growth in the technology world, and that has been a major headwind for the company and stock. However, this market may not be as dead as many believe.
Indeed, Intel’s client computing group — which encompasses platforms for notebooks, desktops, tablets, and mobile communications products — saw revenue increase 12% in the second quarter. Intel is making strides at expanding into a number of higher-growth areas.
While the near-term outlook is brightening, long-term prospects are especially appealing. The company’s recent acquisition of Mobileye, a leader in autonomous driving technology, takes Intel into a major growth area.
Given its yield, I suspect Intel will hold up better during the next market downturn than a lot of more highly valued tech names, which gives these shares some defensive qualities for investors worried about a market downturn. Yielding 2.7%, the stock offers a quality total-return play for DRIP investors.
While Intel’s move to $40 per share represented its highest level in more than five years, it pales in comparison to where Intel traded when it was considered “new” tech.
Indeed, these shares reached nearly $75 per share at the height of the tech bubble in mid-2000. I’m not suggesting that a run at that level is imminent. However, I think the stock can outperform the broad market over the next 24 months.