Day: September 28, 2024

Intel (NASDAQ: INTC) has struggled in recent years as Nvidia and longtime rival Advanced Micro Devices began to surpass it technically. So far, efforts to catch up have fallen short, taking its stock to multiyear lows.

Its recent performance may make investors forget that it developed the first commercially produced microprocessor and was the world’s largest semiconductor company for most of its history. Since its initial public offering (IPO), the stock has offered massive returns for its investors and a critical lesson for those not around to benefit.

Growth and lessons from Intel

When Intel launched its IPO on Oct. 13, 1971, it introduced the stock at a pre-split price of $23.50 per share. Since then, the stock has grown and resulted in multiple stock splits that would have turned that single $23.50 share into 1,215 shares valued at a split-adjusted $0.02 each. Doing some calculations, if you had bought a single share on the IPO day, that investment would be worth $28,990 today, not including dividends.

Unfortunately for its longest-term shareholders, all of Intel’s gains occurred between 1971 and 2000, the period when all 13 of Intel’s stock splits occurred.

If measured against the record closing price of $74.88 per share in August 2000, the one share from the IPO would have grown to a value of almost $91,000. The dot-com bust, the move toward smartphones, and ultimately, the loss of its technical lead undermined Intel in the 21st century, and many wonder what form it will take in today’s artificial intelligence (AI)-driven tech landscape.

Admittedly, this history makes the timing of selling Intel extremely difficult for even the most seasoned investors. Some stocks have recovered from more significant declines, while others later faced bankruptcy and dissolution.

Nonetheless, the story of Intel stock speaks to the growth potential that comes with spearheading and leading an industry for decades. Ultimately, even if Intel is not destined for a comeback, investors can learn from its story and seek companies leading the industries of the future.

Should you invest $1,000 in Intel right now?

Before you buy stock in Intel, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $760,130!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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See the 10 stocks »

*Stock Advisor returns as of September 23, 2024

Will Healy has positions in Advanced Micro Devices and Intel. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

If You Bought 1 Share of Intel Stock at Its IPO, Here’s How Many Shares You Would Own Now was originally published by The Motley Fool

Why does a financial advisor get a fee of 1% or more? That seems really high. If my return is only 4% (for example, in dividends), I am giving away 25% of my return, which is even worse with a bear market. How about charging 1% contingent on the increase in the value of dividend income?

-Drex

It’s completely understandable to view your investment returns as a measure of how much value your financial advisor is providing. Most people want to make sure their money is put to good use.

I’m also not going to tell you that your advisor should be charging 1% or more. There are many different types of financial advisors with many different types of fee arrangements. The right partnership for you will depend on your goals and circumstances.

That said, I would encourage you to look beyond comparing your investment returns against your fees when considering whether your financial advisor is worth the cost. (This tool can help match you with an advisor who might meet your needs.)

Recent Investment Terms Aren’t a Good Gauge of Value

A good financial advisor will work to understand your investment goals and your personal risk tolerance. He or she will help you construct a portfolio that gives you a good chance of reaching those goals, based on the best research available.

But even the best financial advisors are at the whim of the market.

Most professional investors who try to beat the market actually underperform it over a given time period. And those who do manage to outperform the market over one time period can rarely outperform it again over the subsequent time period. For an in-depth illustration of this, see S&P Global’s recent “Persistence Scorecard.”

In other words, even professionals can’t beat the market with consistency. That means that the right expectation is typically to target a portfolio that tracks the market as closely as possible with a balance between risk (stocks) and stability (bonds) that matches your goals and risk tolerance.

And even when that portfolio delivers the long-term returns you need, there will always be good years and bad years. Sometimes, your portfolio will be way up. Sometimes, it will be down. That’s just the way the market works.

Unless your financial advisor is promising to outperform the market, which might actually be a good reason to reconsider the relationship, recent investment returns are often not a good gauge of their value.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

The Real Value of a Financial Advisor

Good financial advisors provide value far beyond the percent return in your investment accounts. Here are a few services a good advisor may provide:

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• Taking the time to understand your goals and values, and helping you construct a plan that allows you to reach them.

• Determining how much you need to save and which accounts you should be contributing to in order to reach your goals.

• Helping you understand exactly what you can afford and creating withdrawal strategies that maximize tax efficiency, so your money lasts as long as possible.

• Making sure you have the right insurance in place.

• Coordinating with an attorney to ensure that you have an estate plan aligned with the rest of your financial plan.

• Guiding you if you want to buy a house, make a charitable contribution, or help your child or grandchild through college.

And yes, they are there to create, implement and maintain an investment portfolio that should provide the long-term returns you need to fund your biggest goals. But even then, there’s far more than the return to consider in terms of what your financial advisor is providing.

Quantifying the Value of a Financial Advisor

A good financial advisor can increase net returns by up to, or even exceeding, 3% per year over the long term, according to Vanguard research.

The most significant portion of that value comes from behavioral coaching, which means helping investors stay disciplined through the ups and downs of the market. That value won’t be easy to see from year to year, especially in years when the market is down. But over the long term, that consistency will do a lot for your bottom line.

Now, this doesn’t mean that you should expect your portfolio to exceed market returns by 3% every year. Instead, 3% is a long-term number. It’s a comparison to how the average investor would perform on her own, not a comparison to market returns.

But it does mean that a good financial advisor is usually providing significant value, even when your portfolio isn’t performing the way you’d like.

How to Evaluate Your Financial Advisor

Evaluating financial advisors is challenging, especially when there aren’t easy numbers you can use to measure their performance.

So what should you be looking at? Here are some key questions I would consider:

• Do they listen well?

• Do their recommendations align with your personal goals and values?

• Do you understand your financial plan and how it is helping you reach your goals?

• Are they responsive and helpful when you have questions?

• Are they helping you with your entire financial situation and not just your investment portfolio?

• Are your investment returns in line with market returns, given your personal balance between risk and return?

• Are they proactive in helping you anticipate and plan for future needs?

• Do you trust them?

• Do you feel more secure because of their guidance?

If you have questions or concerns, I would bring them to your financial advisor. This relationship hinges on trust and communication. This is absolutely something you should be able to discuss.

What to Do Next

Remember that short-term returns are often not a good way to measure your financial advisor’s value. Those returns are almost always out of our control, and a good financial advisor is doing a lot more to help you reach your goals.

Investing and Retirement Planning Tips

• If you have questions specific to your investing and retirement situation, a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• As you plan for retirement, keep an eye on Social Security. Use SmartAsset’s Social Security calculator to get an idea of what your benefits could look like in retirement.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Matt Becker, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Matt is not a participant in the SmartAsset AMP platform, nor is he an employee of SmartAsset, and he has been compensated for this article.

Photo credit: ©iStock.com/Natee Meepian, ©iStock.com/AndreyPopov

The post Ask an Advisor: ‘I Am Giving Away 25% of My Return.’ Why Does a Financial Advisor Earn a 1% Fee, Even in a Bear Market? appeared first on SmartAsset Blog.

Typically, a dividend raise from a large-cap stock isn’t very massive. Such companies typically have a great many shares outstanding, so even a modest hike in the shareholder payout could mean additional expenses of millions, possibly even billions, of dollars. So for the most part, whenever one of these titans declares a dividend raise, it’s more of a bump than a jump.

That sure wasn’t the case with telecom T-Mobile US (NASDAQ: TMUS) earlier this month, when it enacted a 35% dividend raise. That’s quite the generous hike; let’s take a closer look at it and figure out if it helps make the stock a buy.

Improving results and a FCF windfall

In mid-September, T-Mobile’s board of directors declared that its upcoming quarterly dividend is to be $0.88 per share. That was surely pleasing to shareholders who had previously earned a payout of “merely” $0.65. For investors who like to take advantage of such situations, there’s still plenty of time to hop on this dividend raise, as it is going to be paid on Dec. 12 to investors of record as of Nov. 27.

T-Mobile is likely feeling flush because its cash waterfall is flowing robustly. Scrolling through its second-quarter earnings release from the end of July, one line item stands out sharply — non-GAAP (adjusted) free cash flow (FCF). At $4.4 billion, this was a whopping 54% higher year over year and notched an all-time high for the company. Other financial metrics rose nicely, but not as steeply, with its core services revenue advancing 4% to $16.4 billion, and headline net income increasing a chunky 32% to $2.9 billion.

FCF growth is the motor that drives dividend raises, hence the company’s confidence in boosting the payout more than one-third higher. T-Mobile has actually had quite a bit of gas in the tank for raises even before the second-quarter FCF pop, as the quarterly spend on its few rounds of dividends — it only initiated its payout at the end of 2023 — was $769 million at most.

Happily for the company’s shareholders, management raised its FCF guidance for full-year 2024. This should help management meet its goal of roughly 10% annual dividend growth.

Playing catch-up

T-Mobile management might feel it’s in catch-up mode. After all, the two rivals it’s always compared to — Verizon Communications and AT&T — have been steady and reliable dividend payers for years. Not only that, but the pair long ago wandered into high-yield dividend territory and stayed there (despite significant changes in corporate structure, as in AT&T’s case). Verizon keeps its investors sweet with a payout that yields over 6%, while AT&T isn’t far behind at 5.1%.

Although ever-scrappy T-Mobile’s 35% raise is impressive on a number of levels, even at the enhanced new level its distribution would only yield 1.7%.

But we can expect this difference in yields to narrow before long, assuming T-Mobile keeps roaring along. Taking a glance at its cash dividend payout ratio — that’s the percentage of FCF it devotes to those dividend payouts — reveals a notably lower figure than that of AT&T or (especially) Verizon:

VZ Cash Dividend Payout Ratio data by YCharts

Meanwhile, in next-generation mobile technology T-Mobile is better positioned than its two peers. It has managed to build out its 5G infrastructure to the point where it’s a leader; according to a July analysis from telecom researcher OpenSignal, the company is “untouchable” for 5G availability, with T-Mobile 5G service subscribers connected to the tech almost 68% of the time when online. That percentage is nearly six times that of AT&T, and roughly nine times the rate of Verizon.

In fact, of the 15 categories tracked by OpenSignal, T-Mobile took the gold in nine of them, including 5G coverage experience and consistency of quality.

AT&T and Verizon are clearly determined to close these gaps, but 5G isn’t cheap or easy to build out. AT&T plans to spend $11.5 billion to $12.5 billion throughout the second half of this year on capital expenditures, and you can bet large chunks of that are being poured into 5G. In the same period last year, AT&T’s outlays totaled $11.2 billion. Verizon is also spending more, to the tune of $8.9 billion to $9.4 billion against second-half 2023’s $8.7 billion. Is it any wonder that the two are heavily indebted?

Make no mistake, T-Mobile has to spend to earn, too, but its burden isn’t nearly as burdensome. The company estimates its second-half capex will come in at $4.2 billion, up from $4 billion in the year-ago period.

So in short, T-Mobile operates in a business considered indispensable to many consumers, it’s improving its fundamentals effectively while not being as weighed down by spending goals as others, and it has a dividend with room to grow at inspiring rates. All that makes its stock rather compelling, in my opinion.

Should you invest $1,000 in T-Mobile US right now?

Before you buy stock in T-Mobile US, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and T-Mobile US wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $756,882!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 23, 2024

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.

This Telecom Stock Just Declared a Massive Dividend Raise. Should You Buy? was originally published by The Motley Fool