NEW YORK (TheStreet) --From time to time, a voice diverges from the crowd and gets things right.
After expressing discomfort over the financial media's collective decision to praise Dell's (DELL) decision to issue a dividend, TheStreet's Marek Fuchs made the best point of all: ... [T]raders 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.
That's exactly what I was thinking when I watched Maria Bartiromo interview Dell Chairman and CEO Michael Dell on CNBC. Talking about Dell's shift away from the consumer to the enterprise (enterprise accounts for about 80% of Dell's business), the CEO was as stiff and convincing as your favorite politician.
I do not have much of an opinion one way or the other on Dell's ability to successfully complete this transition. Given the broad range of well-established competition the company faces, I'm certainly not optimistic. And the idea of a dividend at this stage of the game actually frightens me.Returning capital to shareholders. It's en vogue. In theory, it looks like an excellent move. What's wrong with providing investors a bit more wealth? Often, quite a bit. I keep a majority of my portfolio in dividend-paying growth stocks. To a company, it's really impossible to question the logic behind or the veracity of the decision to not only issue a dividend, but buy back significant amounts of stock. Most of the firms I hold have been doing both for quite some time. Thanks to strong businesses, most increase the dividend on a consistent basis and not only continue, but raise the value of the buyback program. I consider a dividend as well as a buyback a reward, not an entitlement. It's a way to spread even more prosperity among the masses. (We're a well-positioned, strong and sustainable company. You're in a relatively sound investment, so, here's some icing on the cake.) Companies such as Dell bastardize what returning capital should be all about. It should absolutely not be used a pacifier. (Things are going to stink for a while longer. We're not sure how long or if they'll ever get better, so take this to hold you over.) If things get really bad, I guess it's better that shareholders received something before the creditors.
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