Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



How Dividends Change the Game for This Dow Stock

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The wealth-building power of compound interest will never cease to amaze me. It's a story of patience and attention to detail, where small differences in the short term add up to massive divergence over decades. In the end, the biggest winners don't always deliver the fattest share-price returns.

Here's one example that's very near and dear to my heart right now. Earlier this year, chip-making titan Intel (NASDAQ: INTC  ) was on a roll, totally crushing the Dow Jones Industrial Average (DJINDICES: ^DJI  ) on a five-year basis. Generous dividends played a large part in this outperformance: INTC Chart

INTC data by YCharts.

But something funny happened this summer: Investors suddenly assumed that tablets and smartphones were killing the traditional PC market, making Intel shares worth less than the paper they're printed on. Now, the stock has underperformed its Dow peers in a five-year window, even with dividends reinvested: INTC Total Return Price Chart

INTC Total Return Price data by YCharts.

Is that fair? Only if you buy the "death of the PC" idea without question.

I invite you to check out our premium report on Intel, which weighs the market challenges against the busload of opportunities that remain for Intel. Let me just point out that archrival Advanced Micro Devices (NASDAQ: AMD  ) looks weaker than ever, and potential server rival ARM Holdings (NASDAQ: ARMH  ) has yet to stake a real claim on the data center market.

Meanwhile, the recent price drop has created a rare buy-in window if you're not convinced of Intel's imminent death. You see, Intel tends to turn stock market weakness into shareholder opportunity by buying back shares when they're cheap and raising dividends without pause.INTC Dividend Chart

INTC Dividend data by YCharts.

Add up Intel's record-high dividend yields with the trailing buyback rate, and you get an effective return-booster of nearly 9%. And that's before considering that Intel just borrowed $6 billion to buy back more stock in the near future. These shareholder-friendly policies moved me to open a position last week. This dividend fire hose will pour cash right into my portfolio for years to come.

Should you do the same?

Get an investing edge
When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel is in a precarious long-term situation if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Better yet, you'll continue to receive updates for an entire year. Click here now to learn more.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 12, 2012, at 8:42 AM, DonkeyJunk wrote:

    I agree that INTC is undervalued, but the company has itself lowered guidance considerably, so there are certainly obstacles ahead. However, that guidance still puts the P/E at just around 10, which is still cheap, IMO. I think the company has the ability to navigate these waters, and what may be a cyclical downturn, and come out ahead. All while paying out a fat dividend.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2148562, ~/Articles/ArticleHandler.aspx, 10/22/2016 11:14:44 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 3:59 PM
INTC $35.15 Down -0.28 -0.79%
Intel CAPS Rating: ****
AMD $6.52 Down -0.44 -6.32%
Advanced Micro Dev… CAPS Rating: **
ARMH $0.00 Down +0.00 +0.00%
ARM Holdings CAPS Rating: ***