Value Investing Still Works: Intel Corp. (INTC)

Intel Corp. (NASDAQ: INTC) has been paying dividends for many years. However, because some investors are concerned about the corporation’s ability to return money to shareholders, the company has lately invested considerably in boosting manufacturing capacity. Perhaps INTC has discovered a solution to this problem.

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The semiconductor business is expanding, with chip sales predicted to more than quadruple to more than $1 trillion by the end of the decade. Intel Corp. (INTC) aspires to continue its market leadership, which is why the business is investing in new manufacturing sites across the world.

The firm set aside $30 billion for the development of two new factories in Arizona, as well as more than $100 billion for the construction of manufacturing complexes in Ohio and Germany. These are substantial financial resources, and there have been fears that INTC may be unable to keep paying out hefty dividends.

We should note that the corporation has already paid out $3 billion in dividends this year, which is less than half of the $6.7 billion in net cash generated by operational activities.

Intel Corp. (INTC) initiated partner programmes to develop new firms to increase financial stability. Brookfield Infrastructure, in particular, has joined the firm as a partner, helping to finance half the cost of two new facilities.

Both firms will invest up to $30 billion in the project, with Brookfield Infrastructure contributing 49% and Intel contributing the remaining 51%. As a result, INTC will retain a majority ownership and operational control over the facilities, while production profits will be shared based on the shares.

Intel’s collaboration with Brookfield Infrastructure will boost the company’s financial flexibility by safeguarding its cash balance and debt capacity for future investments. Intel Corp. (INTC) anticipates that the transaction would boost its adjusted free cash flow and profits per share during the building and commissioning phases. As a result, the corporation may continue to pay dividends.

Brookfield Infrastructure has a long history of cooperating with businesses and assisting in the financing of large-scale projects. Such a partnership might be the first in a series of additional ventures to fund other manufacturing sites for Intel Corp. (INTC).

The corporation expects that such collaborations will help offset 20% to 30% of its yearly capital costs. This frees up funds for other uses, such as raising dividends.