Intel Cuts Dividend by 66% to Lowest Payout in 16 Years

(Bloomberg) – Intel Corp., the largest maker of computer processors, cut its dividend payout to the lowest level in 16 years in a bid to preserve cash and focus on a turnaround plan.

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The company will reduce its quarterly distribution to investors to 12.5 cents per share, payable June 1, the chipmaker said in a statement Wednesday. Intel’s current quarterly dividend is 36.5 cents and is expected to cost more than $6 billion in 2023. The new payment resets Intel’s dividend to a level not seen since 2007.

“The decision to decrease the quarterly dividend reflects the board’s deliberate approach to capital allocation and is designed to best position the company to create long-term value,” Intel said in a statement. the press release. “The enhanced financial flexibility will support the critical investments needed to execute Intel’s transformation during this period of macroeconomic uncertainty.”

In its earnings report last month, Intel predicted one of the worst quarters in its history as a slowdown in personal computer sales ravaged the semiconductor industry. Intel is cutting jobs and cutting executive salaries while slowing spending on new factories in a bid to save up to $10 billion by the end of 2025.

Amid a turbulent market, Intel is spending big as part of CEO Pat Gelsinger’s plan to restore its industry leadership. The company has been particularly hard hit by the loss of market share to its rivals. Gelsinger builds new products and tries to compete with bigger competitors in new markets.

Cutting its payouts to shareholders is undermining Intel’s position in growing competition among chipmakers to deliver higher returns. Historically, companies in the sector did not pay dividends, reflecting their cash flow volatility amid wild swings between gluts and shortages in the more than $500 billion industry. This has changed in recent years and dividends have become important, not least because they demonstrate confidence in the stability of a company’s finances.

“Investors have questioned whether Intel needs to cut its dividend payout, which leads us to believe that this announcement, while negative, will not materially change investor sentiment,” said Wells Fargo analyst Aaron Rakers, in a footnote.

Intel shares, one of the worst performers on the Philadelphia Stock Exchange’s semiconductor index this year, have lost 42% in the past 12 months.

Intel’s current dividend yield of more than 5%, calculated by dividing the annual payout by the stock price, dwarfs that of chipmakers. The company paid its first dividend in 1992 and has increased it ever since. But Intel has since lost leadership to wealthier companies like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.

In addition, the company reiterated the forecast for the current period given at the end of January. First-quarter revenue will be between $10.5 billion and $11.5 billion with a loss, less certain items, of 15 cents per share.

Intel is also cutting its budget for spending on new factories and equipment this year. The company now plans to spend about 30% of its revenue, it said on Wednesday. This compares to an early forecast of around 35%.

(Updates with details throughout)

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