Has the technology company Intel found a way to keep its dividends high?

Microchip manufacturer Intel Corp. (INTC) has been a dividend payer for many years. However, the company has recently been investing a lot in expanding production capacities because some investors fear this may negatively affect the possibility of returning money to shareholders. Intel has probably found a way to solve this problem. The semiconductor market is growing, and chip sales will double and exceed $1 trillion by the decade’s end. Intel intends to maintain its leadership position in this industry, which is why it invests in new production facilities worldwide. 

The company has invested $30 billion to construct two new plants in Arizona and more than $100 billion in creating production complexes in Ohio and Germany. These are enormous financial resources, and there were concerns that Intel would be unable to maintain high dividends. It should note that this year the company has already paid dividends of $3 billion, which is less than half of the net cash of $6.7 billion received from operating activities. Intel has launched partner programs to strengthen financial stability to construct new enterprises. In particular, Brookfield Infrastructure has become a partner of the company, which will help finance half of the cost of two new plants. 

Both companies are investing up to $30 billion in the project, with Brookfield Infrastructure financing 49% and Intel the remaining 51%. Thus, Intel will retain a controlling stake and operational control over the facilities, while production revenues will be according to the shares. The partnership with Brookfield Infrastructure will increase Intel’s financial flexibility, protecting the company’s cash balance and debt capacity for future investments. Intel also expects the deal to benefit its adjusted free cash flow and boost earnings per share during the construction and commissioning. 

Thanks to this, the company can continue to finance dividends. Brookfield Infrastructure has a long history of partnerships with companies and helps in large-scale financing projects. For Intel, such a deal could be the first in many other projects to finance other production facilities. The company assumes that such partner programs will help compensate 20% to 30% of its annual capital expenditures and free up capital for other purposes, such as increasing dividends.