The possibility that Intel (INTC) would cut its dividend has been hanging over the stock price since the company announced one of the ugliest quarters I’ve seen in a while on January 26. No question why. Intel’s adjusted free cash flow was a negative $4.075 for the full 2022 year. And with the company looking to invest heavily in new fabs, the $6 billion a year in dividend payouts looked like a potential source of investing cash. And certainly, you wouldn’t want to buy into a stock paying 5.09% (as Intel did today) if the company was about to cut its dividend.
But a dividend cut looks less likely today. The company has raised $11 billion by selling bonds (with an average weighted yield of 5.30%). That’s more than enough to cover the dividend payout and the likely cash burn for 2023 of another $3 billion or so.
The decision to sell bonds to raise cash rather than to cut the dividend (if that’s what this is and I think it is) is also management’s vote of confidence in the future success of Intel’s turnaround strategy. No CEO wants to burn investors just when he needs them to be patient as he works toward a recovery in 2024 (and not in 2023.)
Intel is a member of my Dividend Portfolio. The shares are down 13.75% since I added them to this portfolio for that appealing dividend yield back on August 29, 2022.
On February 2 I posted a Quick Pick video on (on YouTube and here https://jubakam.com/please-watch-my-…quick-pick-intel/) arguing in favor of buying the stock now for the 2024 turnaround. I added shares of my 12-18 month Jubak Picks Portfolio then with a target price of $35. The shares are trading at $28.44 today, February 8, as of 1 p.m. in New York.
