Is Dell Really Committed to Its Dividend?

NEW YORK (TheStreet) -- Dell (DELL) joined a conga line of big technology firms paying dividends, including Apple (AAPL), Microsoft (MSFT), Oracle (ORCL), Intel (INTC) and Cisco (CSCO). And that's a clear-cut good thing, right?

Well, according to the media, yes. The 8 cents a share will be doled out starting in October, amounting to a dividend yield of about 2.7%. Dell's shares were up well over 6% in aftermarket trading yesterday and the media saw grounds for celebration too. There is, if you believe 'em, no cause for anything less than a dance in the streets.

The Associated Press and Forbes and Business Insider and most other media simply ran articles containing a statement from Dell trumpeting the raw brilliance of the move, but no counterbalance from anyone questioning its long-term wisdom.

All Things D and The Wall Street Journal were, at best, agnostic about the move. Seeking Alpha at least did well to council a "wait and see approach before considering buying the stock." They want to make certain that Dell is developing a "dividend culture," where dividends will be protected and increased rather than "just going through the motions."

As Dell's stock flies on the dividend announcement, "wait and see" is an important caveat emptor. Moreover, traders should be concerned (even if the media is not) that a company engaged in the cumbersome process of remaking itself in a fast-changing industry, should think thrice about giving their money away to shareholders.

Acquisition and research and development are probably better uses of cash. Now there's a thought that might pay dividends.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page.

For his "Business Press Maven" column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers.

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