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Dell Dives Into Dividends, Follows Apple & Cisco

ROUND ROCK, Tex. ( TheStreet) -- Dell (DELL) is the latest tech heavyweight to reverse its stance on dividends, announcing plans for a quarterly payment beginning in the third quarter of the current fiscal year.

The no. 2 PC maker expects the initial dividend rate to be 32 cents per share per year, or 8 cents per share quarterly. Based on Dell's Monday closing price of $11.86, the dividend yield would be 2.7%.
Dell announced its dividend plans after market close on Tuesday.

"The payment of a quarterly cash dividend to Dell's shareholders adds another element to our disciplined capital allocation strategy," said Brian Gladden, Dell's CFO, in the company's statement.

Investors responded positively to the dividend news. Shares of Dell, which is about to kick off its annual analyst meeting, rose 2.67% to $12.29 in extended trading on Tuesday.

A number of big-name tech companies have shifted their position on dividends, most notably Apple (AAPL - Get Report), which announced plans for a quarterly dividend and $10 billion share repurchase earlier this year. The iPhone maker last paid a dividend in 1995.

Cisco (CSCO - Get Report), another famous dividend non-payer, announced its first-ever cash dividend last year, while Microsoft (MSFT) made its first payment in 2003.

Dell expects that through the dividend and share repurchases, it will increase its target range for distribution of capital to shareholders to between 20% and 35% of free cash flow from a prior range of 10% to 30%.

At the analyst meeting, CEO Michael Dell also plans tell analysts that the company has executed on its commitment to grow profitability and operating income while expanding its enterprise solutions and services.

-- Written by James Rogers in New York.

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