Last week, computer giant Dell (Nasdaq:DELL) became the latest tech giant to pay a dividend with its ballooning cash hoard. Last week initiated its first ever dividend. The company announced that it will begin paying shareholders an 8 cent quarterly dividend. The annualized 32 cent dividend represents a yield of just under 3% based on the current share price of roughly $12.30.

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Giving Back

Earlier this year, tech darling Apple (Nasdaq:AAPL) announced that it was returning a small portion of its cash hoard to investors via a dividend. Apple, the world's most valuable company with a market cap of some $540 billion, was sitting on over $100 billion in cash prior to the announcement. Dell has nearly $14 billion in cash and is expected to generate over $2 per share in free cash flow in 2012. According to the company, shareholders can expect to receive around 30% back a year in the form of dividends and stock buybacks. Considering that founder and CEO Michael Dell is the company's largest shareholder, investors can take comfort that Dell will follow through with its goal. And because Dell shares today are priced so attractively, share buybacks should create significant value over the long run. In 2012, Dell's free cash flow generation is expected to equal nearly 20% of the company's current market value.

Tech giant Microsoft (Nasdaq:MSFT) really got the dividend wave started when it began with a $3 special dividend a few years back. Since then, Microsoft has not only issued a regular dividend but has increased that it over time and will likely continue to do so in the future. The writing seems to be on the wall for the bellwether tech stocks. Microsoft yields 2.7%, similar to Dell now. Intel (Nasdaq:INTC) leads the pack amongst blue chip tech names with a 3.1% yield. Cisco (Nasdaq:CSCO) follows with nearly a 2% yield, while the lone standout remains Google (Nasdaq:GOOG). With a market cap of roughly $189 billion and cash in excess of $40 billion, it may not be too long before Google shareholders start pressuring the company for some of that cash.

The Bottom Line

Big tech stocks are facing the reality that they no longer need nor have the opportunity to reinvest billions of dollars each year in growing their businesses. As a result, cash is piling up on the balance sheets of the biggest tech names with nowhere to go. Apple had over $100 per share in cash prior to the dividend announcement while Google has over $140 in cash per share. Perhaps in a few years, tech stocks will be known as some of the highest dividend payers in the market.

At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.
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