"No man is an island entire of itself; every man
is a piece of the continent, a part of the main"
-- "No Man is an Island," by John Donne, 1624
No man or corporation is an island, but microchip giant Intel
When discussing Intel's brilliant first-quarter results last night, Chief Financial Officer Stacy Smith explained what Intel intends to do with its growing cash hoard. Intel paid out $0.40 per share in dividends back in 2006, and now the annual payout stands at $0.63 per share. That solid growth trend "continues to be the priority," according to Smith. In fact, Intel has been holding back on share buybacks lately to build the cash balance -- only to dole it out to shareholders in the form of dividends.
So Intel increasingly focuses on dividends rather than acquisitions, which makes sense given how isolated the company is in today's market. The only credible competitor in PC chips is Advanced Micro Devices
Intel can't very well buy any of these companies even if it had unheard-of stacks of cash lying around -- Uncle Sam's antitrust police would shut that deal down in a heartbeat. And there really aren't any smaller fish to fry in any of Intel's areas of expertise. The company would have to move into new markets if it wants to go on a shopping spree. Simpler, then, to just reward shareholders with a sensible dividend strategy.
This approach is not unique to Intel in the semiconductor industry: Texas Instruments
Fool contributor Anders Bylund owns shares in AMD, but holds no other position in any of the companies discussed here. He will miss National Poetry Month immensely when April's bell tolls again. Intel is a Motley Fool Inside Value recommendation. NVIDIA is a Motley Fool Stock Advisor pick. The Fool has created a covered strangle position on Intel, and Motley Fool Options has recommended a buy calls position on it. The Fool owns shares of and has written puts on Oracle. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.