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Dell Jumps on Guidance, Dividend Plan, Share Buyback

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By Dhirendra Tripathi – Dell Technologies stock (NYSE:DELL) rose 3.8% Thursday after the company gave long-term guidance and announced a couple of pro-shareholder moves including a dividend and a share buyback.

The company expects a compounded annual growth of 3% to 4% in revenue and a more than 6% rise in adjusted earnings per share through financial year 2026. The company is currently in the third quarter of financial year 2022.

Dell plans to return 40% to 60% of adjusted free cash flow to shareholders through share repurchases and dividends from the next financial year which starts February.

The company also proposes to repurchase shares worth up to $5 billion beginning November 2021, upon the projected completion of the VMware (NYSE:VMW) spin-off. The company also plans to initiate dividends payouts every three months from the first quarter of the next financial year.

It is targeting an annual dividend of approximately $1 billion on its equity base that stands at 765.11 million shares currently.

The company said it will announce the actual dividend rate and other information about the dividend program upon board approval.

Dell’s total second-quarter revenue was up 15% to $26.1 billion. Adjusted earnings per share was $2.24, up 17%, and higher than the $2.03 estimate put out by analysts.

The company reiterated its third-quarter guidance of an on-year revenue growth of round 17% at midpoint.

As per the forecast given last month, Dell expects annual adjusted EPS to be between $3.69 and $3.75, up more than 50% on the year.

Dell is spinning off its 81% stake in VMware. The company’s plan will see VMware distribute a special cash dividend of $11.5 billion to $12 billion to all VMware shareholders. Dell will use the proceeds from that to cut its debt.

Dell and VMware will enter into a partnership agreement later with VMware continuing to use Dell Financial Services.

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