Semiconductor titanium Intel (NASDAQ: INTC) is known for its generous dividends. Or at least, it gave income-generating investors a hefty helping of quarterly payouts. However, Intel switched gears last year.
Intel’s Recent Dividend History
The company cut its quarterly dividend per share from $0.365 to $0.125 in the spring of 2023. The payout has remained solid since that painful cut, coming in consistently at $0.50 per share annually. The move was part of Intel’s updated capital allocation strategy as the company pulled out all the stops to accelerate the construction of more and better chip manufacturing facilities.
Intel spent $3.1 billion on dividend payments in 2023, down 49% from the record $6 billion in 2022. The 2024 dividend bill should be very similar to last year’s, as Intel’s board is unlikely to increase the payout this year. Construction of its chip-building facility is still ongoing, and Intel needs to cut costs in other areas. Free cash flow is currently negative, reflecting Intel’s cash-intensive infrastructure project.
Number of shares and return
Intel has grown its share count by 4.7% over the past three years, an annual growth rate of 1.8%. You could assume that the share print will continue at the same pace through 2024, increasing effective payouts from $3.09 billion to $3.14 billion.
So Intel is paying out quarterly dividend checks of $0.125 per share, which equates to a cash outlay of about $3.1 billion for the year. Dividend investors are falling out of favor with Intel’s reduced payouts, and for good reason. The dividend yield is a modest 1.6%, well below the five-year average of 2.9%.
Reasons to Like Intel Stock After Dividend Cut
If you’re buying this stock today, it should be because you believe in Intel’s ability to build a world-class chip foundry business while also capturing a serious share of the artificial intelligence (AI) accelerator market. The paused dividend increases should return when the time is right, but that time could be years away.
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Anders Bylund has positions in Intel. The Motley Fool recommends Intel and recommends the following options: long Jan 2025 $45 calls on Intel and short Aug 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
What is Intel’s Dividend Payout? was originally published by The Motley Fool
