For most of the last 30 years there have been some basic rules for tech investing.
One is that cash is good, and more cash is better. Cash gets tech companies through recessions while staying on top of the latest trends, the thinking goes.
The other is that dividends are bad. Dividends, it was thought, meant that you didn't have any better ideas on what to do with shareholder money, or profits, and were giving it back. It was seen as weakness.
Thus, tech investors bought for capital appreciation, not for yield.
Dell's (NASDAQ:DELL) move to add a dividend of 8 cents per share while at the same time seeking to cut costs, despite its current share price of about $11.27, shows this era is over. As Shaw Wu of Sterne-Agee notes, it implies a yield for Dell of 2.7%, a good reason to hold a stock despite hard times when 30-year bonds are under 2.5%.
But Wu's bigger point is that this has now become a standard industry practice. Apple (NASDAQ:AAPL) has a dividend implying a yield of 1.8%. IBM's (NYSE:IBM) yield is 1.8% too, based on its current dividend. Cisco's (NASDAQ:CSCO) yield is 1.9%, and Hewlett-Packard's is 2.4% (NYSE:HPQ). He might have added that Microsoft's (NASDAQ:MSFT) 20 cents/share dividend now yields 2.73%.
These are the companies I grew up with, as a reporter. And we're all growing old together.
Chip-based technologies are now a mature industry. When an industry matures, and when growth slows, dividends are one way of maintaining the stock price. They're a message to investors that price gains are no longer the way to play, that maintenance is in order, and that the nature of the investing game within the sector has changed in a fundamental way.
If your game is capital appreciation, look further along the bleeding edge. The PC business now welcomes widows, orphans, and retirees.