By Aries Poon
TAIPEI--The board of Taiwan Semiconductor Manufacturing Co.
(2330.TW) on Tuesday proposed a record cash dividend for last year,
also the first increase since 2008, after the world's biggest
contract chip maker raked in record profits on a massive contract
with Apple Inc. (AAPL)
TSMC said the board recommended a cash dividend of 4.5 New
Taiwan dollars (US$0.14) per share for 2014, up from NT$3/share in
each of the previous six years. The payout, subject to the approval
of shareholders and to be handed out in August 2015, beats the
company's previous record of NT$3.025/share in 2007.
In January, TSMC Chief Financial Officer Lora Ho told an
investor conference in Taipei that the company was seriously
considering raising cash dividend, as higher revenue has increased
free cash flow. Ms. Ho said she expected free cash flow to continue
to rise in the foreseeable future, as TSMC's market share continues
to expand and the company is comfortable sharing more of its
profits with shareholders.
Due to TSMC's early migration to more advanced chip-making
process technology and growing global demand for mobile electronic
devices, the company's earnings reached new highs in 2013 and 2014.
Annual dividend payout, however, remained around NT$77 billion
between 2008 and 2013. As a result, the company's payout ratio--the
proportion of earnings paid out as dividends to shareholders--fell
to 41% in 2013 from 47%-86% in the 2007-2012 period.
TSMC had been defending its decision to hold on to more cash, as
it needed a war chest to develop new technology, expand factories
and buy new machines.
In 2015, TSMC is planning its biggest-ever capital spending at
around US$11.5 billion to US$12 billion, compared with last year's
US$9.52 billion. The Taiwanese chip maker said it is speeding up
its development of a finer chip making process technology, namely
the 10-nanometer technology, citing fierce competition from Samsung
Electronics Co. and Intel Corp.
Write to Aries Poon at aries.poon@wsj.com
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