Intel commits $10bn to buybacks, juices dividend
Happy days are here again
Intel got the technology sector rolling this morning by announcing that it would be shelling out big bags of cash to buy back its own shares from Wall Street. The company also did a modest increase of its dividend.
Rather than give a big cash payout to shareholders, Intel has taken the financial engineering approach and set aside another $10bn to go down to Wall Street and buy back its own shares from stockholders, letting them cash out as the chip maker's stock is trading at $21 a pop. That's about three bucks better than the bottom set by Intel's share price in September 2010, but still off from the high of $24.37 set in April 2010. Intel has a market capitalization of $116.1bn as El Reg goes to press with 5.58 billion shares outstanding.
"In 2010, Intel achieved its best and most profitable year ever," Paul Otellini, Intel's president and CEO, said in a statement announcing the buybacks. "Today's announcement signals confidence in our fundamental business strategies both today and looking forward, allowing us to return more cash to shareholders."
Intel currently has $5.5bn in cash, $11.3bn in short-term investments, and $5.1bn in trading assets as the fourth quarter of 2010 came to a close. Intel had $2.1bn in total debts, which is pretty small for a $43.6bn company.
Intel already had an authorization to buy up to $4.2bn in shares from its board of directors, and $14.2bn in shares coming out of Wall Street and into Intel's safe will have a considerable impact on earnings per share if Intel does the buybacks quickly.
In addition to the share buyback expansion, Intel also said that it was boosting its dividend slightly. And what I say slightly, I mean slightly – up to 18.12 cents per share per quarter. That is a seven-tenths of a per cent increase from the 18 cents per share that the chip maker announced in January 2010, when it boosted the dividend by 15 per cent beginning with the first quarter of 2011.
Intel started giving out a dividend in 1992, and since that time it has paid about $21bn in dividends. In 2010, Intel paid $3.5bn in dividends to shareholders, which is great money if you happen to own lots and lots of Intel shares (as the top brass at Intel certainly do, so this is a kind of pay raise for them).
Not surprisingly, Intel started buying back its own shares before it began giving out a dividend. The share repurchases at the chip maker started in 1990, and since that time Intel has bought back 3.4bn shares with a then-current value at the time of each purchase of $70bn. ®
Buy back is good only for the top brass
Usually the bonuses of the high-rank management are tied to both earnings per share and the value of each share, on the premise that increase in these means that the company performs better.
Buybacks *artificially* increase these figures without any actual improvement in the situation of the company. The big corporate bosses use this trick to enhance their salaries.
They should have given it all as a dividend.
Buy back = bonu$
Screw the stockholders, lets pay ourselves a big fat bonus!
A big fat two way bonus directly and through stock options.
> authorisation to buy up to $4.2bn in shares from its board of directors
I do hope it's the authorisation that's coming from the BoD & not all those shares, but given the "because (I say) I'm worth it" school of director remuneration it's not utterly unbelievable