Intel Slashes Dividend 66% to Lowest Payout in 16 Years

(Bloomberg) — Intel Corp., 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.

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The company will reduce its quarterly distribution to investors to 12.5 cents a share, payable June 1, the chipmaker said in a statement 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% in New York on Wednesday morning.

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.

Amid the turbulent market, Intel is spending heavily under a plan by Chief Executive Officer Pat Gelsinger to restore its leadership of the industry. The company has taking an especially large hit from losing market share to rivals. 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 didn’t pay dividends, reflecting the volatility of their cashflows amid large swings between gluts and shortages in the more than $500 billion industry. That’s changed in recent years and dividends have become important, not least because they demonstrate confidence in the stability of a company’s finances.

“Investors have been questioning whether Intel would need to reduce its dividend payout—leaving us to believe this announcement, while negative, will not materially change investor sentiment,” said Wells Fargo analyst Aaron Rakers in a note.

Intel shares, one of the worst performing on the Philadelphia Stock Exchange Semiconductor Index this year, have lost 42% over the past 12 months through Tuesday.

Intel’s current dividend yield of more than 5%, calculated by dividing the annual payout by the stock price — dwarfs those of chipmaker peers. The company paid its first dividend in 1992 and has been increasing it ever since. But Intel has since lost leadership to deeper-pocketed companies like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co.

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 won’t affect investment on improving production technology, he said. Similarly the company’s recent cuts in pay and other compensation will be temporary and reversed when finances allow, he said.

“The board and I didn’t not take this decision lightly,” he said on a call with analysts.

Separately, the company reiterated forecasts for the current period given in late January. First-quarter revenue will between $10.5 billion and $11.5 billion with a loss, minus certain items, of 15 cents a share.

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, it said Wednesday. That compares with an early forecast of about 35%.

(Updates with shares)