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NEW YORK (CNN/Money) -
Intel Corp. said Thursday its board has approved a 25 percent increase in the quarterly cash dividend to 10 cents per share beginning in the first quarter of 2006.
The Intel board has also authorized the repurchase of up to $25 billion in shares of common stock under the company's ongoing stock repurchase program.
Intel (up $0.15 to $24.95, Research) shares rose as much as 2 percent in early trading Thursday before pulling back.
"Intel's investments in R&D and capital are enabling the company to post its third consecutive year of double-digit revenue growth," Paul Otellini, Intel president and CEO, said in a statement.
Some investors are hailing the combined increases in both the dividend and the share buyback as a step in the right direction.
"We're happy to see that another company has acknowledged appropriate levels of cash and has also made a strong move toward being shareholder-friendly," said Bartlett Geer, manager of the Putnam Equity Income Fund.
His fund primarily invests in stocks with dividends and owns shares of dividend-paying techs Microsoft (Research), IBM (Research), Hewlett-Packard (Research), Intel (Research) and Motorola (Research).
"I think the combination they announced was very constructive," he said.
During the past few years, Microsoft, Qualcomm, and chip equipment firms Applied Materials and KLA-Tencor began to pay a dividend.
But as CNN/Money columnist Paul LaMonica pointed out in a recent story, several companies that can clearly afford to pay a dividend have chosen not to.
For instance, Apple (Research), Cisco Systems (Research), Dell (Research), Electronic Arts (Research) and Oracle (Research) all have little debt and billions of dollars in cash on their balance sheet.
Geer said Microsoft set a positive example by announcing its dividend, and Intel's moves reinforce that example.
"If you are a board member of a company that historically didn't have to consider what to do with cash or what an appropriate level of cash was, you didn't always have a hard discussion at the board level," said Geer.
"I think starting with Microsoft and now Intel adding to that, there will probably be more board members who want to have that discussion going forward," he added.
Intel began paying a cash dividend in 1992 and has paid out approximately $5.8 billion to its stockholders over the past 52 quarters.
Since the company's stock buyback program began in 1990, Intel has repurchased approximately 2.5 billion shares for about $49 billion.
Geer said the long-term benefit of Intel's move has to do primarily with the buyback, because per share growth numbers will improve from reductions in the number of outstanding shares.
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Intel reopened a slick $2 billion plant, click here for more.
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