Infineon Pledges Dividend Increase on Lower Investments Needs

Infineon Technologies AG, Europe’s second-biggest chipmaker, said it will raise its dividend as early as this fiscal year as advances in productivity curb the investment needed to achieve its target growth rate.

Higher free cash flow allows Infineon to boost the payout by 4 cents to 6 cents a share as early as for the year ending in September, according to a statement today from the company. That’s as much as 50 percent more than the 12-cent dividend for last year. Investment will average about 13 percent of sales starting next fiscal year, down from 15 percent now.

Infineon, based in Neubiberg, Germany, said it will achieve its targeted average revenue growth rate of 8 percent a year over a so-called demand cycle even with the reduced investment levels. Chief Executive Officer Reinhard Ploss has pushed the implementation of more efficient manufacturing methods such as 300-millimeter wafer technology. Second-quarter earnings beat analysts’ estimates last week on demand for automotive and industrial components.

“It is justified that shareholders should also now benefit from the progress made,” Ploss said in the statement. “Therefore it is our intention to raise the dividend significantly for the current fiscal year.”

A semiconductor industry demand cycle typically lasts two to five years, spokesman Kay Laudien said. Laudien said the planned dividend increase doesn’t take into account further expected efficiency gains.

The shares rose as much as 2.2 percent and gained 2.1 percent to to 8.33 euros as of 1:50 p.m. in Frankfurt. That valued the chipmaker at 9.4 billion euros ($13.1 billion).