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ALERT: Removing Intel (INTC) from the Newsletter Portfolios
publication date: Oct 28, 2020
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author/source: Brian Nelson, CFA
ALERT: Removing Intel (INTC) from the Newsletter Portfolios
Image: Intel's share price performance since the inaugural edition of the Dividend Growth Newsletter portfolio. We're removing shares of Intel from both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.
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By Brian Nelson, CFA
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Today, we are removing Intel (INTC) from both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. Intel has been a part of both newsletter portfolios for a long time. The stock was included in the September 2011 edition of the Best Ideas Newsletter with a ~2% weighting in the portfolio at $19.89 per share, and it was included in the inaugural edition of the Dividend Growth Newsletter (January 2012) with a large 7% weighting at $24.25 per share.
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Most recently, Intel was within the top-weighted range for ideas in the Dividend Growth Newsletter portfolio, but we'll be changing that today. We're removing Intel from both newsletter portfolios in its entirety. Though we continue to like the company as we outline in our latest work here, competitive pressures and a balance sheet that sports a growing net debt position make it much less attractive of a stock, in our view. We tend to prefer healthier balance sheets in this environment, namely ones with huge net cash positions.
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As the COVID-19 pandemic continues to spread, we believe that net cash rich, free-cash-flow generating powerhouses with strong competitive advantages and that are levered to secular growth tailwinds will remain the relative outperformers. Entities such as Facebook (FB), Alphabet (GOOG), PayPal (PYPL) are ones that fit the bill nicely, for example. We continue to emphasize ideas that have cash-based sources of intrinsic value as their core foundation (i.e. net cash on the balance sheet and strong expected free cash flows).
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At the time of the inaugural Dividend Growth Newsletter in January 2012, Intel was paying an annualized dividend rate of $0.84 per share. Now, the company pays out an annualized dividend of $1.32 per share, showcasing nearly 60% growth over this time period. Intel's Dividend Cushion ratio remains a very healthy 2.4x (a ratio comfortably above 1 indicates a strong dividend payer from a forward-looking financial standpoint). Intel has surely fit the mold of a strong dividend growth entity that has experienced strong capital appreciation, too.
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In the Best Ideas Newsletter portfolio, the stock has advanced well over 125% when including dividends since its inaugural price, and in the Dividend Growth Newsletter portfolio, the stock has advanced well over 85% when including dividends since its inaugural price. After its removal, there will now be roughly a 6% cash weighting in the Best Ideas Newsletter portfolio and a 10% cash weighing in the Dividend Growth Newsletter portfolio.
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Kind regards,
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The Valuentum Team
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Brian Nelson owns shares in SPY, SCHG, DIA, VOT, and QQQ. Some of the other securities written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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