Dell announced late Tuesday that it was joining the growing ranks of tech companies that pay a dividend. Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Oracle (NYSE:ORCL) and Cisco (NASDAQ:CSCO) all pay quarterly dividends, and Apple (NASDAQ:AAPL) announced earlier this year it will join the group.
Dell has adopted a dividend policy under which the company intends to pay quarterly cash dividends on its common stock beginning in the third quarter of the current fiscal year. Dell expects the initial dividend rate to be $0.32 per share per year, or $0.08 per share quarterly. Based on Monday’s closing price of $11.86 for Dell stock, the stock would yield 2.7%.
Dell's CFO, Brian Gladden, stated:
Our efforts to streamline our operations and shift the mix of our business over the past several years have resulted in sustainably strong cash flow from operations, enabling us to increase the percentage of capital we’ve allocated to research and development, capital expenditures and acquisitions while maintaining an ongoing share repurchase program. The payment of a quarterly cash dividend to Dell’s shareholders adds another element to our disciplined capital allocation strategy.
As with other tech companies that have initiated a dividend program, I will take a wait and see approach before considering buying the stock. It is important to determine if the company will develop a "dividend culture", or if they are just going through the motions.
Disclosure: Long MSFT, INTC.