Intel Into Earnings Is a Strong Buy

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NEW YORK ( TheStreet) -- Buy-and-hold investors have crushed it with Intel(INTC) . Granted, if you bought during the dot-com bubble during 2000, your portfolio may still be upside down, but maybe not depending on your use of option hedging and dividend reinvestment strategies.

Investors from $28+ in 2012 are enjoying a fat and rising dividend while waiting for capital gains. For investors considering adding more shares or entering a new position, right now is an exciting time.

The earnings release is this week, and you can exploit elevated option premium to enhance your entry while at the same time lowering your risk.

First, let's look at what we are expecting with earnings, then the competitive landscape and finally, ideas on maximizing your edge.

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Background: Intel designs, manufactures and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan.

52-Week Range : $19.23 to $29.27

Price to Book : 2.2

Intel is forecast to record lower fourth-quarter earnings after the market closes on Jan. 17.

The consensus estimate is currently 45 cents a share, a drop of 19 cents (29.7%) from 64 cents during the equivalent quarter last year. Estimates from analysts range from a low of 36 cents per share, up to the highest estimate of 50 cents per share. Expected revenue and earnings pressure is the primary catalyst causing the share price to fall out of bed during in the second half of 2012.

TheStreet'sRobert Weinstein writes about Intel in Buy and Forget These 5 Dividend Stocks in 2013.

Twenty-six out of 49 analysts covering Intel now rate the company a hold, while 16 recommend buying and 7 recommend selling.

Seven out of 49 analysts now rate Intel a strong buy down from 8 analysts a month ago. Analysts are increasingly negative; the number of analysts issuing a sell recommendation compared to a month ago has increased.

Based on the last month price action, the analysts that downgraded Intel couldn't have timed it more wrong.

Investing rule: Never blindly, in isolation, follow analysts. They often upgrade at peaks, and downgrade at bottoms. They are human too.

The daily 200-period moving average is falling, a technical bearish indication, however, on the weekly chart, the 200-period moving average continues to remain bullish.

For long-term buy-and-hold investors, the dividend is king. Intel is dividend royalty and currently offers a 4.2% yield. A large yield doesn't impress me when the dividend is at risk of vanishing, but even if Intel's profits are in line with estimates, the payout ratio is under 50%.

I don't know if Intel will beat this report's average estimate, but the smallest beat in the last four quarters was 3.8%. Will Intel beat every quarter in the future? Probably not, but the dividend appears solid. The average analyst target price for Intel is $23.05.