Source: Intel.

Many Intel (NASDAQ:INTC) shareholders are holding out for a long-awaited dividend boost. The chip maker's payouts haven't seen a lift since the summer of 2012. That's 10 straight quarters of disappointingly constant $0.225 payouts per share, which isn't what income investors expect from their favorite cash-sharing outlets.

Well, Intel has declared its next dividend payout. Unfortunately, the dial is still stuck at $0.225 per share. That's eleven quarters running now.

I bought my own Intel shares in 2012 with at least half an eye on predictable dividend increases. That time, I listed Intel's solid dividend history under "bonus points." Not exactly the lynchpin of my investment thesis, but a nice value booster nonetheless.

Since then, my Intel shares have provided a 73% return in plain share price gains. Since I've set my account up to reinvest each dividend check in more Intel shares as the payouts drop in, the total return stands at 86%. Either way, the stock has comfortably outpaced the overall stock market, and I'm a happy Intel investor.

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Still, this is not the way to build a drool-worthy dividend aristocrat. In the meantime, Intel took out a $6 billion loan in 2012, mainly to finance a more generous share buyback policy. Given the uncertain nature of buybacks and the proven shareholder benefits of dividend increases, I would have been even happier if that money had been funneled into richer dividend checks.

Always look on the bright side of life
All of that being said, Intel deserves kudos for its careful capital management.

INTC Cash from Operations (TTM) Chart

INTC Cash from Operations (TTM) data by YCharts

The company is keeping its proverbial foot off the dividend accelerator while investing heavily in the future of its operations. Intel's cash from operations keeps increasing, and this cash flow is then put back in circulation as the company upgrades its chip manufacturing facilities.

Is Intel crazy?
Why is Intel investing so much money in its chip-building processes right now? Wouldn't it be smarter to scale back on these operations until PC sales bounce back or Intel gets a foothold in new growth markets?

That's where a lot of investors get the semiconductor industry all backwards.

If Intel's traditional markets bounce back this quarter, it'll take a while to ramp up production lines and match the newfound surge in demand. Likewise, it's better to create the platform for large shipping volumes in new markets before actually breaking through.

It's important to note that Intel builds nearly all of its chips in-house. Most chip designers have moved their manufacturing to specialized chip foundries, which reduces their need for basic chip technology research.

It's a delicate balancing act.

  • The fab-less chip designers enjoy lower infrastructure costs all around, but then they depend on third-party foundries having enough capacity to handle their orders when the next boom comes.
  • Intel and other companies with actual manufacturing capabilities have to spend a lot on manufacturing lines and new chip-making technologies that may never be fully used. But if and when the target markets do turn the corner, Intel stands ready to fill order volumes that'll leave fab-less operators stumped.

So Intel invests its billions in next-generation manufacturing facilities now, while looking for ways to serve the next megamarket. Whether it's wearable computing or the Internet of Things, or simply a return to stronger PC and server sales, Intel will be ready.

The end result is flattish free cash flows, leaving little room for ostentatious dividend increases. Yes, Intel uses less than 50% of its free cash flows to power its dividend checks, but that's actually a bit high compared to Intel's historical payout ratios. So there's nothing wrong with leaving some extra breathing room until the necessarily high capital expenses start slowing down again.

INTC Cash Dividend Payout Ratio (TTM) Chart

INTC Cash Dividend Payout Ratio (TTM) data by YCharts

So that's another potential dividend increase, and another quarter left untouched at $0.225 per share. It's payable on December 1 to Intel shareholders of record as of November 7.

Will the next dividend announcement break the 11-quarter streak? Or will Intel's dividend stay flat for yet another quarter? I'm hoping for an increase but not exactly holding my breath.

After all, the share price returns are keeping me quite satisfied. And as a long-term investor with a greater focus on share price gains than on rising dividend checks, I do appreciate what Intel is doing with its cash flows instead. The company is investing in its own future.

But if I were an income investor at heart, as many Intel buyers were in 2012, I'd be stomping my foot and demanding at least a token dividend increase. Eleven quarters is a long time when you're expecting something to happen every year. And I don't expect dividend investors to give Intel a second glance these days, despite its meaty 2.6% dividend yield. 

Anders Bylund owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days.

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