Business

Intel slashes dividend to lowest payout in 16 years

Chipmaker is seeking to preserve its cash as it implements a turnaround plan

Intel employs about 5,000 people in Ireland, with the majority of them located in Leixlip, Co Kildare. The company has implemented about 130 job cuts at the site over recent months. Photograph: David Paul Morris/Bloomberg

Wed Feb 22 2023 - 16:34

Intel, the biggest maker of computer processors, slashed its dividend payment to the lowest level in 16 years in an effort to preserve cash and focus on a turnaround plan.

The company will reduce its quarterly distribution to investors to 12.5 cents (11.8 cents) a share, payable on June 1st, the chipmaker said in a statement on Wednesday. Intel’s current quarterly dividend is 36.5 cents and was projected to cost more than $6 billion in 2023. The new payment resets Intel’s dividend to a level not seen since 2007.

“The decision to decrease the quarterly dividend reflects the board’s deliberate approach to capital allocation and is designed to best position the company to create long-term value,” Intel said in the statement. “The improved financial flexibility will support the critical investments needed to execute Intel’s transformation during this period of macroeconomic uncertainty.”

Intel shares were up less than 1 per cent in New York on Wednesday morning.

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In its earnings report last month, Intel forecast one of the worst quarters in its history as a slowdown in personal-computer sales ravages the semiconductor industry. Intel is eliminating jobs and slashing management pay while also slowing spending on new plants in an effort to save as much as $10 billion by the end of 2025.

Intel employs about 5,000 people in Ireland, with the majority of them located in Leixlip, Co Kildare. The company has implemented about 130 job cuts at the site over recent months.

Amid the turbulent market, Intel is spending heavily under a plan by chief executive Pat Gelsinger to restore its leadership of the industry. The company has taken an especially large hit from losing market share to rivals. Mr Gelsinger is building new products and trying to take on larger competitors in new markets.

Reducing its payments to shareholders undermines Intel’s standing in a growing competition among chipmakers to offer higher returns. Historically companies in the industry did not pay dividends, reflecting the volatility of their cashflows amid large swings between gluts and shortages in the more than $500 billion industry. That has changed in recent years and dividends have become important, not least because they demonstrate confidence in the stability of a company’s finances.

Mr Gelsinger said the company remains committed to increasing the dividend again in the future when circumstances allow. – Bloomberg

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