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Watch Intel ETFs on Strong Dividend & Bullish Outlook

Zacks Equity Research

The chip giant, Intel (INTC ), pleased investors on November 19 with a bright outlook for 2016 sales. Amid a deteriorating PC market which was Intel’s backbone, this guidance shows signs of hope. The revenue for 2016 is projected to grow in the mid single digits, per management, which is in line with analysts’ expectation of 4% year-over-year growth.


As a proportion of revenues, R&D and MG&A spending are expected to decline by half a point next year. Management also provided a decent outlook for capital expenditure (up from the prior full-year 2015 capital spending guidance of over $7 billion to the latest 2016 projection of $10 billion) which added to investors’ delight.


Dividend Hike


To add to this, Intel hiked its annual cash dividend by 8 cents to $1.04 per share, reflecting an 8.3% increase from the prior dividend payout. The raised dividend will be paid in the first quarter of 2016. Intel has a consistent track of paying quarterly dividends. Its last two dividend hikes were of 6.7% and 7.1%.


Investors should note that Intel came up with impressive Q3 results in mid October having topped the Zacks Consensus Estimate on both lines. The company posted earnings per share of $0.64 on revenues of $14.47 billion, beating the Zacks Consensus Estimate of $0.59 and $14.23 billion, respectively.


Market Impact


Backed by double good news, Intel shares jumped 3.44% in the key trading session of November 19 on elevated volume. This was the stock’s biggest advance since early September. The smooth trading in the stock could give a boost to the semiconductor ETFs that are heavily invested in the biggest semiconductor company.


This is especially true as Intel currently has a Zacks Rank #2 (Buy) and falls in the solid industry with a Zacks Industry Rank in the top 4%. The Zacks Style Score for Growth and Value were ‘B’ and ‘A’ respectively. However, the momentum was not with the stock as evident with the score of ‘D’. This suggests value in the INTC share price and the related ETFs for the coming days (read: Semiconductor ETFs Surge on Impressive Q3 Earnings)


Below, we highlight three ETFs with the highest allocation to INTC that could be big movers post Intel’s solid outlook. The trio was up in the key trading session of November 19. Investors should closely monitor the movement in these funds and could catch the opportunity from any surge in the INTC price in the coming days (read: Time for Semiconductor ETFs?).


Market Vectors Semiconductor ETF (SMH)


This is one of the most liquid ETFs in the semiconductor space with average daily volume of roughly 3.7 million shares. The fund invests about $279.3 million of assets in 26 holdings. Of these firms, the in-focus Intel takes the first spot, making up 18.62% of the assets.


Generally, when one stock accounts for about 20% of an ETF's weight, its individual performance decides a lot of the fund’s price movement. The fund charges 35 bps in fees.


The fund has added about 3.2% in the year-to-date time frame and moved up 0.4% in the key trading session. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.


First Trust NASDAQ technology Dividend Index Fund (TDIV)


This fund provides exposure to the dividend payers of the broad technology space by tracking the Nasdaq Technology Dividend Index. The product has amassed about $497.4 million in its asset base while charges 50 bps in annual fees. Volume is good as it exchanges about 100,000 shares in hand per day.


Intel is the second with 9.22% allocation. In total, the fund holds about 99 securities in its basket. In terms of industrial exposure, the fund allocates one-fifth portion in semiconductor and semiconductor equipment. The fund is down 4.7% year to date and rose 1%% on November 19.


iShares PHLX Semiconductor ETF (SOXX)


This ETF follows the PHLX Semiconductor Sector Index. The fund holds about 30 stocks in its basket with AUM of $404 million while charging a slightly higher fee of 47 bps per year from investors (see: all the Technology ETFs here).


Here, INTC takes the second spot at 8.89% of total assets. The fund has lost about 3% so far this year and rose over 0.2% in the key trading session on November 19. The fund currently has a Zacks ETF Rank #3 with a ‘High’ risk outlook.


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INTEL CORP (INTC): Free Stock Analysis Report
 
MKT VEC-SEMICON (SMH): ETF Research Reports
 
FT-NDQ TECH DIF (TDIV): ETF Research Reports
 
ISHARS-PHLX SEM (SOXX): ETF Research Reports
 
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