Here's another thought re dividends and $35 price, besides pension funds that can now buy CPQ:
A dividend, no matter how low, combined with a price in the $35 range [at split time, going up into the 70s then splitting again] is a masterful way of increasing brand loyalty and sales down the line. There are numerous people who own stock in T (AT&T) and only because of this use T as their long distance carrier. Also, psychologically, people like the idea of having 100 shares rather than 50 shares of a company so the really little investor, the average working stiff, can now pick up shares--even if a stock at 70 and 35 (post split) have the same PE, 70 still seems more expensive with more potential for loss to inexperienced investors. Now an 'owner' of CPQ [in the 35-45 range], this person is going to be personally motivated to buy a CPQ for home--why not have the profits from the purchase benefit the purchaser (shareholder) rather than the shareholders of Dell, HP, Gateway, etc? What is he/she going to tell his/her friends: What a great computer he has and, when they are ready to buy a new PC, that CPQ "is the best" (whether it really is or not--the shareholder is prejudiced).
Another group, abet small, are **children**. Parents and grandparents who want their children to learn about the stock market and buy stocks for them or help them pick out what they would like, will now find CPQ very, VERY attractive. Kids like computers, so CPQ fits two things parents/grandparents try to keep in mind when buying stock for/steering children to stocks:
1. Get a company the child will be able to identify with product wise, something the child can get excited about [utilities, banks, and pharmecuticals don't fit the ticket].
2. Find something that _pays_a_dividend_AND_has_a_DRIP so the child's holding can grow and he/she can learn the value of saving and investing (rather than blowing every penny that comes in).
From an initial blah to negative view of the dividend or $35 share price, I am now starting to become VERY enthusiastic. These strategic moves are going to cut into Dell's market share **much** more than CPQ's recent copying Dell's marketing. I suspect some high ups at Dell and Gateway gagged when they read about the CPQ dividend <gggg>--this is going to be a rough one for them to match.
Regards,
Lynn, shareholder of CPQ and T who has a CPQ computer and uses T for long distance carrier (just human nature to support one's own)
BTW, this inspiration came when I decided to call my college roommate this weekend. She and her husband have been stressing the importance of money management and investing to their two young children. The 11 year old just bought his first stock in February and went directly into a DRIP. You should hear that boy! Only orange juice now allowed in the refrigerator? Minute Maid. Only soda he will drink--Coke. Yes, he bought Coke (23 shares). Yes, he is trying to convince his non-Coke drinking friends that Coke (and Minute Maid) are best, _without_ telling them he owns stock in Coke [another lesson to children--keep finances private]. Wait till I tell him about CPQ today... |
