General
September 23, 2021
5 minutes read

Markets: Dell Authorizes $5B Share Buyback, Dividend Plan

Dell Technologies (NYSE: DELL) is one of those tech giants that though not lustrous as in their prime, are still going…

Dell Technologies (NYSE: DELL) is one of those tech giants that though not lustrous as in their prime, are still going strong with tens of billions of dollars of revenue annually. Others in that camp include IBM, HP, Oracle, et al.

In today’s news, Dell has announced a new share buyback program of up to $5bn beginning this November. The buyback will start at a projected time when Dell has completed its VMware spin-off that was announced this April, a deal that’ll hand over nearly $10bn of cash as a special dividend to it that’ll be used to pay down debt.

Companies like Dell typically spend billions on share buybacks to stimulate stock growth, companies whose revenues are massive but growing merely in single-digit percentages over the years. Buybacks can be a remedy when revenue growth isn’t enough to encourage investor interest.

In fact, Dell bought back $562mn worth of shares in the three months ended July 2021, its most recent fiscal quarter. It concluded the same quarter with nearly $12bn of cash on hand and billions more in short-term and long-term investments (according to its earnings report), so a $5bn share buyback is very affordable.

Along with the share buyback, Dell also made some other important announcements, including its plans to start paying quarterly dividends in its next fiscal year. On Dell’s calendar, it’s the fiscal year 2023, but in actuality, it begins by February 2022, meaning shareholders should expect quarterly dividends starting from this time.

Starting in its next fiscal year, Dell says it’s targeting returning between 40% to 60% of its adjusted cash flow to shareholders with buybacks and dividends. That makes it a good attraction for buy-and-hold type investors.