Long valued by investors for its attractive and steadily rising dividends, Intel may not be able to afford such increases in the near future, according to Bernstein Research analyst Stacy Rasgon.
“Intel has been fairly consistent at raising their dividend over the years, but recently the magnitude of increases has slowed,” he said in a note to his clients Thursday. And he warned that “we believe a continued slower pace of dividend increases is possible versus what investors have enjoyed in the past, under our current forecasts for the company’s growth.”
Rasgon cites a combination of factors for this assessment.
Part of it is due to the company’s efforts to keep its microchip prices relatively low to help stimulate demand for ultrabooks, a hybrid-tablet device Intel is promoting because it uses Intel’s brainy processors.
In addition, Intel has spent heavily on new factories and stock repurchases, burning through cash that otherwise could be used for dividend increases.
Rasgon concluded that the amount of net cash Intel has for future dividend payments is “well below many technology peers.”
Asked to respond to Rasgon’s note, Intel spokeswoman Laura Anderson replied, “as a matter of policy, Intel does not comment on speculation.”
But she added that the 22.5 cent per share quarterly dividend that Intel issued Thursday, which will be paid on June 1, “is the latest example of how returning cash to shareholders is an important part of Intel’s capital allocation strategy. Intel’s dividend and stock buyback program has returned approximately $119 billion to stockholders since the program’s inception.”