In This Article:
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Intel Corporation (NASDAQ:INTC) share price is 63% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 9.2% in the last three years.
In light of the stock dropping 6.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
View our latest analysis for Intel
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the last twelve months Intel went from profitable to unprofitable. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. It may be that the company has done well on other metrics.
We are skeptical of the suggestion that the 1.1% dividend yield would entice buyers to the stock. Unfortunately Intel's fell 24% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Intel will earn in the future (free profit forecasts).
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Intel the TSR over the last 1 year was 67%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!