Intel Cuts Dividend on Outlook, Boost Turnaround Plan
In an effort to preserve cash and focus on its turnaround plan, Intel Corporation, the world’s largest computer processor maker, has reduced its quarterly dividend payment to investors to 12.5 cents a share, payable on June 1. This is a significant cut from the current quarterly dividend of 36.5 cents, which was projected to cost the company more than $6 billion in 2023.
According to a statement released by the company, the decision to reduce the dividend was a deliberate approach to capital allocation and aimed to best position the company to create long-term value. The improved financial flexibility resulting from this cut will support critical investments needed to execute Intel’s transformation during this period of macroeconomic uncertainty.
In its earnings report last month, Intel forecasted one of the worst quarters in its history as a slowdown in personal-computer sales has ravaged 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.
However, reducing payments to shareholders undermines Intel’s standing in a growing competition among chipmakers to offer higher returns. Historically, companies in the industry didn’t pay dividends, reflecting the volatility of their cashflows amid large swings between gluts and shortages in the more than $500 billion industry. But dividends have become increasingly important in recent years as they demonstrate confidence in the stability of a company’s finances.
Despite the dividend cut, Intel CEO Pat Gelsinger said the company remains committed to increasing the dividend again in the future when circumstances allow. The company’s paring back in capital spending is targeted at reducing capacity increases, but it will not affect investment on improving production technology. Similarly, the company’s recent cuts in pay and other compensation will be temporary and reversed when finances allow.
In addition to reducing its dividend, Intel is also reducing its budget for spending on new plants and equipment this year. The company now plans to spend about 30% of revenue, compared to an earlier forecast of about 35%.
INTC Stock Price Forecast & Analysis
According to the analysis of 35 analysts, the average target price for Intel Corporation stock over the next 12 months is USD 29.52. This target price represents an expected return of approximately 13.18% from the current stock price of USD 26.06.
Additionally, Stock Target Advisor’s analysis of Intel Corporation’s stock suggests a slightly bearish outlook based on 7 positive signals and 9 negative signals. These signals are based on a variety of factors, such as technical indicators, price trends, and analyst opinions.
Intel Corporation’s current stock price of USD 26.06 represents a significant decline from its previous levels. The stock has decreased by -9.01% over the past week, -10.81% over the past month, and -42.14% over the last year. The decline in stock price can be attributed to a variety of factors, including the company’s decision to reduce its dividend payment and the overall slowdown in the semiconductor industry.