Intel Stock Buyback: A $10B Investment

Intel's $10 billion stock buyback plan is a significant investment in the company's own shares. This move is expected to boost investor confidence and potentially increase the stock price.

The buyback plan will allow Intel to repurchase up to 10% of its outstanding shares. This means that Intel will be taking a portion of its own cash and using it to buy back stock from the market.

By doing so, Intel aims to reduce the number of outstanding shares and increase the value of each remaining share. This can lead to higher earnings per share and a more attractive stock price for investors.

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Intel is planning to repurchase up to 5% of its equity every year for five years, which will allow the dividend to rise by 25% at no higher cost to the company.

This move is a brilliant strategy, as it will increase shareholder value and give patient value investors a chance to take advantage of the weakness in the stock.

Intel's current $19.7 billion share repurchase authorization is good for around 8.8% of the company's total shares outstanding, which is a significant portion of its market capitalization.

The authorization is substantial, but it's unlikely that Intel will buy back all of those shares at once, as purchases will happen gradually over time.

Intel's share count is naturally set to rise thanks to share-based compensation, so a portion of that $19.7 billion will simply make up for that dilution.

Intel has already wasted billions on buybacks, with $7.6 billion spent on buying back shares at an average price of $55.32 and $59.15 per share in the fourth quarter of 2019 and first quarter of 2020, respectively.

The stock is currently trading at about $49, making it historically cheap, but also a sign that the company has lost its process lead to TSMC and is struggling in the PC market.

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Intel's cloud and technology segment is a significant contributor to its revenue, accounting for 24% of its total sales in 2022. This segment includes sales of data center and artificial intelligence hardware.

Intel's data center business has seen a significant increase in demand due to the growing need for cloud computing and artificial intelligence. This demand is driven by the increasing adoption of cloud services and the need for faster and more efficient computing.

Intel's cloud and technology segment also includes sales of artificial intelligence hardware, which is used in applications such as natural language processing and computer vision. This segment is expected to continue growing as AI becomes more prevalent in industries such as healthcare and finance.

The use of cloud and technology is not limited to large corporations, with many small businesses and individuals also adopting these technologies to improve their operations and productivity.

Intel can afford its accelerated share buyback, with $10 billion representing only 4.76% of its $210 billion market capitalization.

The company has already secured agreements for 166 million shares, which is 81.8% of the expected total buyback of 202.9 million shares.

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Intel generated $7.75 billion in free cash flow in Q2, more than enough to cover the $1.4 billion cost of the dividends, leaving $6.35 billion for debt reduction and future share buybacks.

This buyback plan could lead to a 50% increase in the stock price over 10 years, as the reduced number of shares outstanding allows for 5% annual dividend increases without increasing costs.

Intel can afford its accelerated buyback plan. The company has a market capitalization of $210 billion and plans to spend $10 billion on share buybacks between now and the end of 2020.

This represents about 4.76% of its market capitalization, which is a relatively small percentage. In Q2, Intel made $7.75 billion in free cash flow, which is more than enough to cover the cost of the buybacks.

Intel already has agreements for 166 million shares, or 81.8% of the expected total. It will complete the remaining $2.4 billion "when markets stabilize", but there is no indication of what that means or if the company will return to buybacks in Q4.

For more insights, see: General Motors Announces Additional Share Repurchases and a Higher Dividend.

The company can afford to increase its dividend per share by 5% every year now at the same cost as before. This will bring in 50% more real income to shareholders over 10 years at no higher cost.

Intel has a history of returning value to shareholders through dividends and stock repurchases. From 1990 through the third quarter of 2018, the company returned approximately $177 billion to stockholders.

Intel has suspended its stock buybacks indefinitely due to the coronavirus outbreak. This means they're not buying back their own stock for now.

The company has a strong balance sheet, with $13.1 billion in cash and short-term investments at the end of December. They're being cautious with their finances.

Intel's management believes suspending stock buybacks is a prudent decision, given the uncertainty surrounding the pandemic's length and severity. They're prioritizing their cash reserves.

Worth a look: Share Buyback Good or Bad

If you're considering buying Intel stock, you might want to take advantage of the weakness in the stock through share repurchases, which can increase shareholder value.

Assuming the company repurchases up to 5% of its equity every year for five years, this will allow the dividend to rise by 25% at no higher cost to the company.

Patient value investors will probably be well off to take advantage of this weakness in the stock, as the buyback catalyst will help the stock eventually move higher.

Intel is accelerating its stock buyback strategy by spending $10 billion to buy up 166 million shares of its stock. This move is aimed at raising stock prices by reducing the amount of shares on the market.

The company believes its shares are worth more than their recent trade values, which have dived nearly 20% in the last month due to the delay of its 7nm process to 2022. Intel's shares have jumped 4% after the announcement.

Intel is funding the share repurchases with existing cash resources, which have been bolstered by strong operating results in the first half of 2020. This has given the company the ability to invest in the business during a period of economic uncertainty.

The $10 billion share buyback is part of Intel's $20 billion stock buyback strategy, which aims to reduce the dilution of share value. The company plans to complete the $2.4 billion balance of its planned $20 billion share repurchases when markets stabilize.