hotrodlincoln
Moderator
Joined: 08 Apr 2003
Posts: 1691
Location: Not in Austin anymore
|
 Posted: Sat Jul 02, 2005 12:47 am Post subject: Buying Dell Without A Broker |
 |
|
| Quote: |
Charles Carlson, DRIP Investor, 06.30.05, 9:26 AM ET
In the February 2005 DRIP Investor, I wrote that sources were saying that Dell was readying a direct-purchase plan. Well, the computer giant, in fact, recently joined the growing ranks of technology stocks with a new direct-purchase plan.
The plan, administered by American Stock Transfer and Trust, is a pretty good plan from a user perspective. Minimum initial investment is $250. Subsequent investments may be as little as $25. There is no enrollment fee. Buying fees are $2.50 plus $0.10 per share--not bad considering the higher fees in many other direct-purchase plans. For enrollment information call (877) 739-9991, or visit American Stock Transfer and Trust.
Curiously, Dell (nasdaq: DELL - news - people ) initiated a direct-purchase plan even though the firm does not pay a dividend. While this is not unprecedented, especially among technology related plans, it is unusual. Yahoo! (nasdaq: YHOO - news - people ), for example, offers a direct-purchase plan yet does not pay a dividend.
To be sure, Dell generates prodigious amounts of cash. The firm currently has nearly $10 billion in cash on its balance sheet, or roughly $4 per share--and Wall Street has speculated that the firm might soon share that cash hoard with shareholders in the form of a dividend. Usually, a firm initiates a dividend and then implements a dividend reinvestment plan (DRIP). Perhaps, Dell is doing it in reverse: starting a plan in anticipation that dividends are soon to follow. We'll see.
Special Offer: Direct-purchase and dividend reinvestment plans are the most efficient ways for investors to invest for the long term, but not all companies offering these plans are worth your capital. That's why you need DRIP Investor, an advisory service to alert you to the best new buys every month. Click here, for July's buys.
From a DRIP investor perspective, Dell's new plan is significant in that it will likely put more pressure on those technology companies that don't offer plans--Cisco Systems (nasdaq: CSCO - news - people ), Oracle (nasdaq: ORCL - news - people ) and Google (nasdaq: GOOG - news - people ) come to mind--to implement them. Google, in particular, would seem a natural for a direct-purchase plan.
That Dell is offering a plan without paying a dividend may also spur other non-dividend paying companies, including those outside the tech sector, to reconsider offering programs.
Of course, just because a firm offers a direct-purchase plan doesn't make it a good investment. However, Dell is an outstanding investment for investors who want exposure to the tech sector. Earnings have continued to march higher for the company. The consensus earnings estimate for fiscal 2006 ending in January is $1.61 per share. The stock trades at 25 times that earnings estimate. And if you wash out the $4 per share in cash on the balance sheet, the stock trades for 23 times that earnings estimate. That is a reasonable earnings multiple, given the firm's expected earnings growth and historical valuations.
Dell has traded sideways for the last three years. A strong breakout above $42 would be especially bullish for the stock. I would feel comfortable holding Dell in a portfolio with other quality tech stocks.
Special Offer: While the overall stock market has been flat for the past five years, subscribers to the Turnaround Letter have enjoyed returns of 19.8% annualized since 2000, thanks to George Putnam's knack for spotting bargains such as Apple Computer at $8 per share. Click here for all of his latest picks.
As for the technology sector overall, I've been growing increasingly bullish in the last few months. Valuations are much more reasonable for many tech stocks than they have been in a long time.
Several prominent technology stocks are offering DRIPs or direct-purchase plans, and most of these companies offer plans whereby investors may buy the first share and every share directly. Among the stocks, my favorites, along with Dell, are Intel (nasdaq: INTC - news - people ) and Microsoft (nasdaq: MSFT - news - people ). For more aggressive investors, Qualcomm (nasdaq: QCOM - news - people ) and Motorola (nyse: MOT - news - people ) are interesting at current prices.
Excerpted from the June 2005 issue of DRIP Investor.
|
http://www.forbes.com/newsletter/2005/06/30/dell-google-qualcom-intel-cz_cc_0630soapbox_inl.html |
|
FAQ
Search
Usergroups
Register
Profile
Log in to check your private messages
Log in
