The stock market sell-off of 2022 has been brutal on Intel (INTC +5.77%), with shares of the chip giant down 27% so far this year.
But Intel has been a top investment over the years, increasing investors' wealth substantially thanks to a mix of stock upside and a fat dividend. For instance, $100,000 invested in Intel stock at the beginning of 2007 was worth just over $390,000 at the end of 2021, assuming the dividends were reinvested.
But now, will a similar investment in Intel stock help you retire as a millionaire after 15 years? Let's find out.
NASDAQ: INTC
Key Data Points
The solid dividend is here to stay
It is evident that Intel's dividend has played a major role in boosting investors' wealth over the years. The good part is that the company looks all set to sustain its fat dividend yield of nearly 4% despite facing near-term headwinds. Intel's revenue, for instance, is expected to remain flat in 2022. Earnings are expected to drop to $3.49 per share from $5.47 per share in 2021.
However, Intel has a forward dividend payout ratio of 41%, which indicates that its earnings this year would be enough to help it sustain its nice yield. More importantly, Intel's earnings are expected to start growing once again from next year. It is also worth noting that Intel's long-term growth forecasts point toward a significant improvement in the company's top and bottom lines, as well as its free cash flow.
More specifically, Intel expects its revenue to increase in the mid- to high-single digits in 2023 and 2024. This is the phase when the company intends to spend aggressively on its infrastructure and research and development to regain its technological lead over rivals, with 35% of its revenue earmarked for capital spending. The company expects neutral adjusted free cash flow during this period.
In 2025 and 2026, Intel expects revenue to increase at an annual pace of 10% to 12%. Margins are expected to increase during this period while operating expenses are set to fall. The company will also dial down its capital investments to 25% of revenue. As a result, Intel expects adjusted free cash flow at 20% of revenue during that period.
Not surprisingly, analysts expect Intel's bottom-line growth to improve after this year's slowdown.
INTC EPS estimates for current fiscal year data by YCharts
The improvement in Intel's earnings means that there is room for an increase in the dividend in the long run. As such, investors looking for a regular income stream in the form of dividends can count on Intel to boost their portfolios in the long run and help them get closer to their dream of retiring as millionaires. But at the same time, it won't be surprising to see the stock step on the gas thanks to the increase in Intel's addressable market.
Intel stock could deliver impressive upside
Intel stock may not have set the market on fire in recent years, but the company can do so in the future thanks to stronger end-market opportunities.
Intel has been getting a huge chunk of its revenue from selling central processing units (CPUs) for computers so far, but that's changing now. In the first quarter of 2022, the client computing group was its largest source of revenue, with $9.3 billion in sales. It accounted for half of the company's top line, but revenue was down 13% year over year.
On the other hand, the data center and artificial intelligence group generated $6 billion in revenue, up 22% year over year. Revenue from sales of edge networking products also increased 23% year over year to $2.2 billion. Additionally, Intel's entry into the discrete graphics card market led to a 21% year-over-year increase in its accelerated computing and graphics revenue to $219 million.
So, there are several growth hotspots that could help Intel stock step on the gas in the long run. As it turns out, the company sees a total addressable market worth $450 billion by 2026, and just $90 billion of that will come from the traditional client computing business. The rest of the markets that Intel is tapping are expected to clock solid double-digit growth in the future.
All this indicates that Intel's growth could accelerate and lead to a healthy upside in the stock price. It won't be surprising to see the stock beat the broader market's returns over the next decade and more. And that, combined with its nice dividend yield, could help investors get closer to their goal of retiring as millionaires.
That's why patient investors with a long-term investment horizon can consider accumulating this semiconductor stock as it's trading at just six times earnings right now.
