Intel Corporation (NASDAQ:INTC) is one company that is dedicated to returning cash to shareholders, while utilizing capital in an efficient manner. The company has been committed to providing dividends to its shareholders and conducting share repurchases programs. Additionally, INTC has also increased its dividend overtime and in the past 20-years the company has returned a total of $40 billion to investors. Furthermore, the last 20-years have also seen the company carry out share repurchase programs totaling to $100 billion, but this number has been off-set by stock compensation in the past. Currently, the company has $4.9 billion worth of diluted shares outstanding.
Strong Control of Market Share
INTC enjoys an edge over its competitors, since it controls the lead position in the industry. Being the largest supplier of semiconductor chips, allows Intel to have control over a larger part of the market. Additionally, the wide arrays of products that utilize these chips indicate that the company will continue to hold a dominant position. Currently, Intel has a 75% share of the semiconductor market. As such investors of INTC should have little to worry about.
Utilization of Capital
Apart from holding a dominant position in the market, Intel has also been very efficient in its use of capital. As per data, compiled over the past 20-years, Intel usually limits its capital expenditure to remain within a fraction of the revenues. This is usually between 11% and 18% of the total revenues for the year. It is expected that INTC would maintain this figure in the future as well. It should be noted here that this is contrary to conventional trends of growing companies. When a company grows, its capital expenditures tend to increase and weigh on its earnings. However, it seems as if Intel’s expansion plans have resulted in immediate returns, allowing it to stay within its set boundaries in terms of expenses.
The efficiency of Intel’s management has allowed the company to accumulate gross cash of $26.5 billion. However, the company’s use of debt for acquisitions and domestic purposes has also resulted in INTC’s total debt to amount to $21.4 billion. This leaves net cash of $5.1 billion, at the end of 3Q2015. Additionally, the company’s most recent acquisition of Altera is expected to result in negative net cash balance, but Intel has assured investors that net cash balance should reach zero by the end of FY2016. This means that there would not be any share buybacks during this time. Furthermore, Intel plans to keep its net cash near zero, for the long-term, indicating further returns to investors, once the company has normalized capital conditions.
Although the acquisition of Altera may seem like an unfavorable move on part of Intel, but in reality the company has been able to keep its lead through such acquisitions. Furthermore, the company’s efficient use of capital and its dedication to providing dividends to shareholders has been a key factor in its share value. Currently, Intel Corporation (NASDAQ:INTC) dividend is valued at 3% of the stock, owing mainly to yearly hikes for the past 20-years. Additionally, once Intel recovers from the Altera acquisition, it is expected that it would continue with share buybacks and further lower the count of outstanding diluted shares.
It is safe to say that Intel is one of the most reliable stocks in the market. The company’s control over its market share and its strategy to acquire smaller companies to keep control of that share has proven to be effective. Added to this, Intel’s management is dedicated to continuously improve its value for shareholders. Furthermore, the company’s long-term plan to keep its net capital near zero means that the Intel would soon take control of its outstanding diluted shares, through share buybacks and also create further hike in the share price.