Dell is shifting some of its financial policies with the hopes of putting more money in the hands of stockholders while building out its enterprise divisions.
Revealed by CEO and chairman Michael Dell at the company’s 2012 Analyst Meeting starting today, Dell's board of directors have adopted new policies that will result in quarterly cash dividend payments on its common stock starting during the third quarter of the current fiscal year.
Dell has a few goals here. First, through the dividend and share repurchases, Dell aims to boost its target range for distribution of capital to shareholders from 10-30 percent of free cash flow to 20-35 percent.
For reference, Dell has generated $4.9 billion in cash flow from operations over the last year.
Furthermore, Dell is predicting that the initial dividend rate will 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 dividend yield would be 2.7 percent.
To push and maintain this kind of momentum, chief financial officer Brian Gladden acknowledged in prepared remarks that this will also require a balancing act between quarterly dividend payments and new investments within Dell's enterprise solutions and services portfolio.
However, Dell remains optimistic in that field -- mainly because it looks like that's where the Round Rock, Texas-based corporation is making most of its money these days, as explained in a statement:
The result has been a shift in Dell’s sales to higher-margin data center solutions consisting of servers, networking, storage and related software and services. Dell reported in its last fiscal quarter that 50 percent of the company’s gross margin and more than 30 percent of its revenue came from the sale of enterprise solutions and services. The company projects its enterprise solutions, software and services business will grow at a 10 percent compounded annual growth rate through fiscal year 2016 and represent an increasing percentage of Dell’s operating income margin.