Applied Materials announces new $10 billion buyback, raises dividend

By Geoffrey Smith 

Investing.com -- Applied Materials (NASDAQ:AMAT) announced a new $10 billion buyback and raised its dividend the most in five years, signaling its continued confidence despite the slump facing its key clients in the chipmaking sector. 

The buyback adds to the $4.7B still outstanding under its existing buyback program, while the quarterly dividend will rise to 32c a share from 26c.

“The dividend increase, our largest in five years, and the new share repurchase authorization reflect our positive long-term view of the semiconductor market and our confidence in Applied’s outsized growth opportunities driven by our technology leadership, broad portfolio of differentiated products and strong customer engagements,” said Chief Executive Gary Dickerson in a statement.

The move reflects what the company sees as the growing predictability of its business, owing to its services division moving to a subscription-based model as it has grown.

"We believe our free cash flow will continue to grow over time and can support increasing the dividend at an accelerated rate and doubling the previous dividend per share over the next several years," said Chief Financial Officer Brice Hill.

The company said in February that it expects adjusted earnings per share to dip slightly in the current quarter to around $1.82 from $2.02 in the first quarter of its fiscal year, which ended in January. That's due in part to a $250M hit to revenue from a cybersecurity lapse at one of its suppliers. Net sales are expected to be around $6.4B, the lowest in four quarters but up marginally from a year earlier.