So it wasn’t much of a surprise to most investors–although some of us were hoping that Intel (INTC) would hold its dividend steady after a big bond offering in the last few weeks.
But today Intel cuts its dividend by 66% to 12.5 cents a share from a prior 36.5 cents. The stock dropped only 2.26% on that big news.
I think the final straw was a forecast that showed the PC-chip market was even softer than expected. That would, logically, mean that turning Intel’s fortunes around would take longer and that the company would need extra capital to fund that turnaround.
Over the next five years, the dividend cut will provide Inrel with an extra $20 billion to spend on new chip designs and new chip factories. I’m certainly not happy about a big dividend cut for a stock that, until tomorrow, is in my Dividend Portfolio, but I think that extra capital will make it easier to execute the steps that will stop the erosion of Intel’s market share and restore the company’s manufacturing prowess.
Tomorrow I will, consequently, Intel out of my Dividend Portfolio. The stock was in that portfolio because of its better than 5% yield. That’s now history so the stock doesn’t make the cut for this portfolio any longer. (Intel is down 22.68% since I added it to this portfolio on November 30, 2022.)
On the other hand, I think that Intel remains a very solid turnaround story and a good stock to own for investors looking for capital gains over the next 18 months or so. Therefore I’m keeping it in my Jubak Picks Portfolio with a target price of $35 a share. (This position is down 9.81% as of the close on February 22 since I added the stock to this portfolio on February 8, 2023.)