Applied Materials came to the rescue of the beaten-down tech sector Wednesday when the company announced a big stock buyback and its first dividend.
AMAT shares rose 2.5% after the chip equipment giant announced a $4 billion stock buyback plan, up $1 billion over the company’s previous plan. AMAT also announced its first dividend of three cents a share, payable on June 8, a big step for a company that previously dismissed notions of a regular dividend because of the cyclical nature of the chip business.
Returning excess cash to shareholders in the form of a dividend has long been viewed by investors as a sign of financial strength, but it’s something the tech sector has largely resisted until recently, preferring to plow excess cash back into growth initiatives. But with $6.4 billion in cash, AMAT said it is in a position to do both.
“Today’s announcement to pay a dividend, as well as the increased share repurchase authorization, is further evidence of our commitment to a balanced approach to capital allocation and returning value to stockholders,” CEO Michael Splinter said in a statement.
AMAT’s announcement sent chip stocks to a 1.5% gain on the day, and helped the broader market escape an early sell-off on higher than expected consumer inflation.
The Nasdaq rose fractionally to 1990, the S&P 500 edged higher to 1172, and the Dow fell 14 to 10,456. Volume rose to 2.25 billion shares on the NYSE, but declined to 1.8 billion on the Nasdaq. Decliners led 26-7 on the NYSE, and 20-10 on the Nasdaq. Downside volume was 67% on the NYSE, and 40% on the Nasdaq. New highs-new lows were 12-146 on the NYSE, and 29-107 on the Nasdaq.
Oracle was unchanged after the company beat estimates and raised guidance, yet continued to experience difficulties in its applications business, excluding the company’s recent acquisition of PeopleSoft.
MCI edged higher on reports that the company’s board of directors will meet to discuss Qwest’s
takeover offer.
