DELL (NASDAQ:DELL): 10-Year Review
Long-term investors in Dell may find this information of interest.
Revenue, net income, dividends, share repurchases and long-term debt, for the 10 years ending Jan/Feb 2002 through 2012 from 10-k filings were reviewed.
The first thing that stands out:
- The amount of owners' cash that was exchanged for shares.
- No dividends have been paid
- The increase in long-term debt
- The decline in the market value of the firm
What happened to long-term debt?
It moved higher.
- 2003: Long-term debt was $506 million
- 2012: Long-term debt was $6,387 million
Long-term debt increased $5,881 million or 1,162%
What happened to revenue?
- 2003: $35,404 million
- 2012: $62,071 million
How many years of revenue would it take to pay off the long-term debt?
- 2003: 0.01 years
- 2012: 0.10 years
What happened with net income?
- 2003: Net income was $2,122 million
- 2004: Net income was $2,645 million
- 2012: Net income was $3,492 million
How many years of net income would it take to pay off the long-term debt?
- 2003: 0.24 years
- 2004: 0.19 years
- 2012: 1.83 years
How much treasury stock has been purchased?
- $29,172 million worth in the past ten years.
- $ 2,290 million in 2003
- $ 2,717 million in 2012
What percentage of net income was paid out in cash the past ten years?
- 000.0%: 10 year total for dividends
- 108.2%: 10 year total for share repurchase
- 000.0% of net income in 2003 went for dividends
- 107.9% of net income in 2003 went for share repurchases
- 00.0% of net income in 2012 went for dividends
- 77.8% of net income in 2012 went for the repurchase of shares
How many years was cash paid out?
- 0 years for dividends totaling $0 million. A $0 million year average
- 9 years for treasury stock purchases for nearly $29,172 million. A $3,241 million a year average
Chart of Net Income versus Share Repurchase:
What percentage of revenue went for dividends and share repurchases?
- 0.0%: 10 year total for dividends
- 5.4%: 10 year total for share repurchase
- 0.0% of revenue in 2003 went for dividends
- 6.5% of revenue in 2003 went for share repurchases
- 0.0% of revenue in 2012 went for dividends
- 4.4% of revenue in 2012 went for the repurchase of shares
What percentage of net income was paid out in cash during 2012?
- 00.0%: Dividends
- 77.8%: Share repurchases
- 77.8%: Total payout
Why have departing owners enjoy more cash than owners?
- The board of directors, elected by shareholders, decided it is in the best interest of shareholders for their cash to be given to departing owners.
What has happened to the market value of the stock?
It has declined.
- $ 67.2 billion per 10-k for year ending February 1, 2002
- $107.3 billion per 10-k for year ending February 3, 2006
- $ 25.3 billion per 10-k for year ending February 3, 2012
Why should long-term investors care?
The value of the firm is generally determined by earnings power and or the dividend yield. Cash used to repurchase shares may result in a dividend payment lower than it could be, or no dividend.
The interest cost on long-term debt must be paid. Therefore, greater debt and interest expense means less cash available for dividends and or reinvestment to grow future earnings.
Share repurchases have not added long-term value to the firm and the level of debt has increased. Investors may want to encourage the board to return cash to owners' via dividends.
The stock, (currently at $12.50) is taking a beating after the release of earnings. If funds allocated to share repurchases were paid out to owners as dividends then the stock might find some support based upon the dividend yield. However, this would require a change of thinking at the board level.
Shares outstanding March 7, 2012 totaled 1,762,044,563. Dollars spent repurchasing shares during the year ending Feb 2012 totaled $2.717 billion. The potential dividend payment might be $1.50 if funds used to repurchase shares were paid to owners via dividends. At current price of $12.50 it would generate a 12% yield.
10-k filings at www.sec.gov. Chart by Pat Stout.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.