Tuesday, April 9, 2013

I Am Buying Intel (NYSE: INTC) This Morning, April 9, 2013 At The Open

Let's get right down to business and show you the daily chart of mine for Intel (Nasdaq: INTC) and discuss why I am buying 100 shares at the open, today, April 9, 2013:

(click image to enlarge) 
Daily Chart for Intel on April 9, 2013 pre-market

For a link to an automatically updating version of the above chart with whatever comments I might add to the chart, click here.

Now when you click the above image of my chart, you will read the following in a box I placed at the top of the chart: "Dividend is currently .225 cents quarterly (.90 cents annually) and is the 2nd highest yielding stock of the Dow 30 on April 9, 2013 at $21.09 per share...Was a Dog of the Dow for 2013."

For the moment, I am going to pretend you've never bought a stock in your life and you have no idea what the above paragraph refers to.

Let's break it down:

A "quarter" is a quarter of a year, or 3 months. Every quarter, companies are required by law to report "earnings". Hence, the words "Earnings Reports" you hear all the time in January, April, July and October, the months when the most earnings reports for the previous quarter are announced. 

So, looking at upcoming earnings reports for this month of April 2013, we will be reading results for the first three months of 2013 (January, February & March).

Now, all Dow 30 components pay dividends on every share of stock owned by shareholders. 

As noted above, Intel shares pay a quarterly dividend of .225 cents at this moment in time. 

Hence, if I already owned 100 shares of Intel before the date which signals I'm eligible to collect the quarterly dividends (called an "ex-dividend" date) I will collect .225 cents on every share I own.

Let's say, for illustrative purposes, that should I own 100 shares of Intel and I still own them when the next ex-dividend date passes, then I am eligible to collect $22.50  (100 shares X .225 cents per share -= $22.50) in my Roth IRA which I can then:

a) Use to invest in another company's stock with a $7.99 fee (Fidelity) or $9.99 fee (Ameritrade) attached.


b) Use to re-invest in Intel stock without any trading fee associated

In all cases at pre-retirement age, I always choose "b)" as reinvesting dividends in a good company's stock is a surefire way to become wealthy over time as the Magic of Compounding takes place.

And for those of you who have never used a trading account to build a portfolio of dividend reinvestment stocks, all major online brokerages (such as Fidelity and Ameritrade, both of which I use) will not only notate the date of the money transfer to your account from any dividends paid, but will also show you how much that money bought in fractional shares.

Again, the following is an illustrative example.

Let's say Intel's dividend paid at the close of yesterday's stock price of $21.09. How many more shares of Intel would your quarterly dividend of $22.50 buy (and your brokerage would not charge you to reinvest)?

Take 22.50 and divide it by 21.09. So we have 22.50/21.09 = 1.067 shares. So our online brokerage would make this free trade (reinvestment of dividends) overnight.  

At the beginning of tomorrow's market, our account would no longer show 100 shares of INTC.

Instead, it would show we now own 101.067 shares of INTC stock.

Now you're wondering what so special about a paltry 1.067 share purchase with dividends? Well, in our next blog, we are about to show you "The Magic Of Compounding" with a $1,000 purchase of Exxon Mobile, set up to reinvest the dividends over 50 years time, and what that would have resulted in for you had you let simply let the Magic of Compounding work for you and had you never invested any more external money in Exxon stock.

The next blog will open your mind to the Power of Compounding and why dividend reinvestment is a safe and sure way to becoming a multi-millionaire.

Meanwhile, here are two more charts of Intel stock, one being a weekly chart, and the other a monthly chart. For updated versions of the charts below click here for the weekly chart and here for the monthly chart.

Weekly chart for Intel on April 9, 2013 pre-market

And here's my Monthly Chart for Intel as of April 9, 2013 pre-market

I am buying 100 shares of Intel for the following reasons:

  1. Intel is trading right above the trendlines in all three charts. The monthly chart directly above shows this most clearly. The older a chart, the stronger the support/resistance shown by trendlines and in this case the trendline is a line of support which is now 23 years old.
  2. Secondly, Intel is now the second highest paying dividend yield of all Dow 30 stocks. Using Dogs of the Dow practices, this would be a buy were it the first trading day of January and it would be a stock which will be compounding more quickly with dividend reinvestments in future quarters going forward. In that Intel is now trading today (April 9, 2013) just a few cents above where it was on the first trading day of 2013, we are going to buy it at today's open so that we can use real life dividend reinvestment for future illustrations on this blog.
  3. Thirdly, there is some promising news coming out about Intel which we shall cover later this week. This news hints that Intel might be able to rebound like most Dow 30 stocks have already done since the beginning of this year.

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