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Dell Technologies Inc. is planning a $5 billion share-repurchase program and projected revenue growth of up to 4% annually through fiscal 2026 as it nears the spinoff of its majority stake in VMware Inc. in November.

The company also plans to start paying dividends to shareholders in the fiscal quarter that will run through April 2022. Dell is targeting dividends of about $1 billion a year, it said Thursday.

Dell has said that the spinoff, in which it plans to sell its $52 billion stake in the cloud-computing company, is part of a strategy to strengthen its finances. When Dell announced the spinoff in April, it owned about 81% of VMware, whose technology supports apps, network solutions and companies’ cloud-computing operations.

Dell shareholders are set to receive a special cash dividend of $11.5 billion to $12 billion from the spinoff, including $9.3 billion to $9.7 billion for Dell itself. Dell has said it plans to use cash from the dividend to pay down debt.

Dell, founded by Michael Dell in 1984, is in its second stint as a publicly traded company. It first went public in 1988, but Mr. Dell and Silver Lake, a private-equity firm, took the company private in a 2013 leveraged buyout. The current New York Stock Exchange listing dates to 2018, when Dell returned to public markets through a transaction in which it bought out the shareholders of a pre-existing stock that tracked Dell’s VMware stake.

As Dell parts ways with VMware, growth opportunities will come from Dell’s infrastructure-solutions business, which supports enterprise computing needs, and its client-solutions business, which focuses on personal computers, Dell executives told analysts in a Thursday presentation.

Growth in those business lines will help Dell boost its revenue and profit over the next five years, Dell said. The company expects single-digit-percentage annual sales and profit growth through the fiscal year ending in January 2026. Dell estimated revenue will increase at an annual rate of 3% to 4%, and adjusted earnings per share will rise by more than 6% a year during that period.

In the 12 months through January, Dell logged $94.22 billion of revenue and adjusted earnings of $8.00 a share, results that included contributions from VMware.

Other computing companies have also been boosting their buyback plans. Earlier this month, Microsoft Corp.’s board approved a plan to buy back up to $60 billion of its stock. Few S&P 500 index members spend more on repurchases than Microsoft does, according to S&P Dow Jones Indices.

Across the economy, strong earnings have lifted companies’ cash balances in recent quarters, a trend that has led to rising buybacks. Many companies have turned to repurchasing shares, rather than investing in capital expenditures, as supply shortages limit good investment opportunities.

Share repurchases at S&P 500 companies rose to $370.4 billion in the first half of the year, up 29% from the same period a year ago. In comparison, capital spending—which usually goes toward assets such as land, buildings and technology—increased 4.8% to $337.17 billion in that period.

Meanwhile, Democrats have proposed taxing buybacks as Congress debates ways to fund trillions of dollars of healthcare, education and climate legislation. Some Republican congressmen have said they oppose that plan.

 

This story has been published from a wire agency feed without modifications to the text

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