Wall Street expects Intel to cut record dividend

(Bloomberg) — Due to cuts in Intel Corp. its dividend yield has become the highest among large technology companies. With the demand for capital spending rising and business emptying on Wall Street, rumors are rampant that the payouts won’t last.

Most read by Bloomberg

In 2023, Intel’s quarterly dividend of $0.365 is projected to be more than $6 billion at its current size. shareholder payouts, threatening another blow to his beleaguered shares.

“The dividend seems inconsistent with the lack of cash flow and a heavy investment cycle,” writes Morgan Stanley analyst Joseph Moore. Manufacturing progress is critical to Intel’s reorganization plan, and “everything else needs to be geared towards that goal,” Moore said.

Intel’s return of more than 5%—calculated by dividing the annual payment by the share price—dwarfs that of chip companies. The company paid its first dividend in 1992 and has been increasing it ever since. During this period, Intel taught the rest of the chip industry the importance of using the best manufacturing techniques. This required a huge investment in research, design, and capital investment, but brought in more than enough money to cover the bill and continually increase payouts.

But, having ceded leadership in the production of chips to richer companies such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., Intel is now facing a group of competitors trying to seize its dominance in the personal computer and server processor markets.

In its fourth-quarter earnings report, Intel made one of the bleakest forecasts in its history, predicting an unexpected loss for the current period and a sales range that falls short of billions of dollars of analyst estimates.

A combination of high spending and falling revenues prompted downgrades from the three main rating agencies. Bloomberg Intelligence has calculated that Intel’s cumulative cash use could exceed domestic cash generation by more than $20 billion through 2024.

Intel management is well aware of the importance of maintaining their payouts. However, when CFO Dave Zinsner was asked about last month’s income statement dividend, he didn’t dismiss the idea of ​​a cut.

“Board of directors, management – ​​we have a very disciplined approach to our capital allocation strategy and we are going to continue to be very careful about how we allocate capital to owners,” he said. “And we’re committed to maintaining a competitive dividend.” The company declined to comment further on this story.

Of course, the company can keep dividends at the current level. Bloomberg’s dividend forecast requires Intel to keep the payout.

Intel’s final decision will have serious implications for its stock, which has fallen nearly 42% over the past year amid a historic drop in the price of chips used in personal computers. The Philadelphia Stock Exchange Semiconductor Index was down 13% over the same period.

On Wednesday, Intel shares fell 1% and the industry index fell 0.9%.

According to Charles Sizemore, chief investment officer of Sizemore Capital Management, the dividend cut will almost certainly hurt stocks more in the short term.

“Different types of investors gravitate towards different types of stocks,” he said. “If your main clientele is income investors and you are no longer attractive as income stocks, you become sort of an orphan.”

Technical chart of the day

Best Tech Stories

  • Chase Coleman and Andreas Halvorsen were among the notable investors who bought shares in Amazon.com Inc. and sold to Microsoft Corp. in the fourth quarter, according to Bloomberg’s analysis of 13F documents.

  • ASML Holding NV, a leading manufacturer of lithography machines for the semiconductor industry, said a former employee in China stole data on its patented technology and export controls could have been violated as a result.

  • Berkshire Hathaway Inc., owned by Warren Buffett, has reduced its stake in Taiwan Semiconductor Manufacturing Co. just months after the big stake was disclosed in what was an unusually quick change from the storied stock picking firm, leading to a chill in investor sentiment for the chip giant.

  • Airbnb Inc. released a first-quarter revenue guidance that beat analysts’ estimates, signaling that travel demand remains resilient even after record growth in 2022. Shares jumped.

  • Elon Musk has said he may need the rest of this year to clean up Twitter Inc. before turning it over to a new CEO, potentially prolonging fears that the billionaire is being distracted from Tesla Inc. management.

  • Because Apple Inc. promotes a “buy now, pay later” lending business, the company lays out rules for how it will approve transactions. One key factor: whether you have been a good client in the past.

–With the assistance of Subrat Patnaik and Tom Contigliano.

(Updates with the value of the quarterly dividend in the second paragraph and the Bloomberg dividend forecast in the 10th.)

The most read edition of Bloomberg Businessweek

© 2023 Bloomberg LP

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button