Semiconductor titan Intel (INTC +4.89%) is known for its generous dividends. Or at least, it used to serve income investors a rich 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 stayed firm since that painful cut, consistently adding up to $0.50 per share on an annual basis. The move was part of Intel's updated capital allocation strategy, as the company pulled out all stops to accelerate the construction of more and better chipmaking facilities.
Intel spent $3.1 billion on dividend payments in 2023. That's 49% below an all-time high of $6 billion in 2022. The dividend bill for 2024 should be very similar to last year's, since Intel's board isn't likely to increase the payout this year. The chip-building facility buildup is still happening and Intel needs to conserve costs in other areas. Free cash flows are currently negative, reflecting Intel's cash-intensive infrastructure project.
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Key Data Points
Share count and yield
Intel has increased its share count by 4.7% over the last three years. That's an annualized growth rate of 1.8%. You could assume that the share prints will keep running at the same pace throughout 2024, raising the effective payouts from $3.09 billion to $3.14 billion.
So Intel is issuing quarterly dividend checks of $0.125 per share, which amounts to a cash expense of roughly $3.1 billion for the full year. Dividend investors are falling out of love with Intel's slashed payouts, and for good reason. The dividend yield works out to a modest 1.6%, well below the five-year average of 2.9%.
Reasons to like Intel's stock after the 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 taking a serious slice of the artificial intelligence (AI) accelerator market. The paused dividend raises should return when the time is right, but that moment may be several years away.
