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How Is Intel Compensating Investors through Share Buybacks?

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Intel’s capital allocation policy

Intel (INTC) has been rewarding its shareholders not only through investments and acquisitions but also via share buybacks and dividends as it focuses on strengthening its business.

In 2018, the company recorded operating cash flow of $29.4 billion and free cash flow of $14.3 billion. Intel also returned nearly $16.3 billion to shareholders through dividends and share buybacks. For 2019, the company expects free cash flow of $16 billion.

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Share buybacks

During the fourth quarter, the company repurchased nearly 51 million shares for ~$2.3 billion. In 2018, it repurchased 217 million shares for $10.7 billion. The company is left with $17.3 billion worth of shares under its current repurchase plan. On November 15, Intel’s board approved a $15 billion increase to its share buyback program.

Intel’s peer Qualcomm (QCOM) announced an accelerated share buyback program in September 2018 whereby the company would repurchase ~$16 billion shares as part of its previously announced $30 billion stock repurchase plan. Qualcomm’s share repurchase program is compensation to investors for the termination of its $44 billion acquisition deal with NXP Semiconductors (NXPI) in July 2018 amid opposition from China.

Dividends

The company paid dividends of $1.4 billion in the fourth quarter and $5.5 billion in 2018. During the quarter, the company’s board approved a 5% hike in its annual dividend to $1.26 per share, up from the previous $1.20 per share. Accordingly, the new cash dividend of $0.315 per share will be paid on March 1 to stockholders of record on February 7.

Dividend yield

Intel’s annualized dividend of $1.26 per share represents a yield of 2.53%. Peers Qualcomm, Broadcom (AVGO), and NVIDIA (NVDA) have dividend yields of 4.88%, 4.02%, and 0.41%, respectively, as of January 24.

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