Intel Corp., the largest producer of computer processors, has significantly reduced its dividend payments to the lowest in 16 years. The company has taken this step to safeguard its cash reserves and push forward with a rejuvenation plan.
On Wednesday, the chipmaker announced they would lower their quarterly payment to investors to 12.5 cents per share, to be disbursed on June 1.
In the fourth quarter of 2023, Intel anticipates paying more than $6 billion for 36.5 cents per share dividends. Intel has reset its dividend to its highest rate since 2007.
The board’s strategic decision to lower the quarterly dividend displays its commitment to proper resource distribution. This is to ensure long-term growth and success of the company, Intel declared in their announcement.
Intel stocks experienced a minimal increase of less than one percent on Wednesday morning in the New York market.
Last month, Intel forecasted its weakest quarter in history as the impact of the downturn in personal-computer sales decimated the semiconductor sector.
To reduce expenses, Intel is letting go of employees and lowering the compensation of senior personnel. Additionally, it will cut back on construction project funding, hoping to save up to $10 billion by 2025.
Shareholders Dividend slashed
During the uncertain market, Intel is making a large financial commitment to a plan put in place by Pat Gelsinger, their Chief Executive Officer, to regain its position of power in the industry.
The business has sustained a tremendous loss of market share to its competitors. With an ambition to challenge larger players in different areas, Gelsinger has been devising novel offerings.
Intel’s standing among the chipmakers could be undermined if shareholder payouts are reduced, and this is critical considering the growing competition within the industry to offer higher dividends.
Over the years, the sector’s firms tended not to distribute dividends due to the unsteady nature of their revenue flows, which were strongly affected by imbalances in the $500 billion-plus industry. That has changed recently, with dividends becoming important though they did not demonstrate confidence in a firm’s stability.
This year, Intel’s shares were among the most underwhelming stocks listed on the Philadelphia Stock Exchange Semiconductor Index. It lost around 42% in share value in the past 12 months.
Intel’s dividend yield is currently above 5%, towering over the dividend yields of its chip-manufacturing competitors. Since 1992, the company has been steadily increasing its dividend payment.
Intel’s market leadership has, however, since been superseded by firms such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., which have greater financial resources.
Temporary Cost-Cutting Measures
Despite decreasing capital spending and recent pay cuts, CEO Gelsinger promised to raise the dividend in the future. He assured that investment in improving production technology would remain unchanged. He further stated that these compensation reductions would be temporary until the company could restore them.
In addition, the business reiterated its estimates for the present term, which were initially issued in late January. First-quarter revenue is projected to be between $10.5 billion and $11.5 billion, with a net loss.
