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Dell Technologies (DELL) recently hiked its dividend by 18%, giving DELL stock a 2.48% dividend yield. However, this is much higher than its 3-year average yield, since the company started paying dividends. As a result, DELL stock looks undervalued and could be worth 21% more using three valuation methods.
DELL stock closed at $84.80 on Thursday, April 17. This is well off its 3-month high of $120.96 on Feb. 19, but up from a recent low of $71.63 on April 4.
I discussed the company's recent dividend hike in my March 2 Barchart article, “Dell's 18% Dividend Hike Shows the Stock Could Be Undervalued.”
Dividend Yield-Based Price Target
As a result, with DELL's annual dividend per share (DPS) of $2.10, the annual yield to new investors is almost 2.48%:
$2.10 / $84.80 = 0.02476 = 2.48%
The issue is that DELL stock has had a much higher average yield over the last three years, according to Morningstar:
2022 ……. 2.46%
2023 ……. 1.88%
2024 ……. 2.10%
Avg ………. 2.15%
That implies that if DELL stock were to trade at its average yield, it could be worth 15% more at almost $98 per share:
$2.10 DPS / 0.0215 = $97.67 price target
$97.67 / $84.80 = 1.152 = +15.2% upside
In other words, if the stock were to rise to the point where it has a 2.15% dividend yield, investors could make at least 15%.
Moreover, the same type of valuation metric applies to its historical earnings multiple.
Earnings-Based Price Target
For example, Morningstar's data shows that DELL stock's average forward price/earnings (P/E) multiple over the last 5 years has been 9.26x. But right now, DELL stock's forward P/E is lower than this, implying it is worth more.
For example, for 2025, Seeking Alpha's earnings per share (EPS) forecast is $9.21 and $10.37 for 2026. That implies its next 12 months (NTM) run rate EPS is $9.79 per share. As a result, using the average forward yield multiple, DELL is worth 6.9% more:
$9.79 NTM EPS x 9.26 = $90.66 price target
$90.66 / $84.80 = 1.069 +6.9% upside
Moreover, analysts have significantly higher price targets, even after factoring in the effect of tariffs on the company's sales and earnings.
Analysts' Price Targets
For example, Yahoo! Finance reports that the average price target for 24 analysts is $127.06 per share, and Barchart's mean survey is $130.57 per share.
In addition, AnaChart.com shows that its survey of 21 analysts is $103.02 per share. So, the average of these three surveys' price targets is $120.22, or +41.7% higher.
But just using AnaChart's survey, the lowest price target, shows an upside of +21.5%:
$103.02 / $84.80 = 1.215 = +21.5% upside
Summary Price Targets
As a result, using all three methods, the average of the dividend-based, earnings-based, and analyst-based target price is:
Dividend-based target: $97.67
Earnings-based target: $90.66
Analyst-based target: $120.22
Average …………………… $102.85 target
Upside …………………… +21.3%
One way to play this, to set a lower buy-in target price, is to sell short out-of-the-money (OTM) put options in nearby expiry periods.
Shorting OTM Puts
For example, the May 16, 2025, expiration put options period shows that the $80 strike price put has a midpoint premium of $3.20 per put contract.
This expiration period is 29 days away (days to expiry or DTE), and the strike price is 5.7% below today's price. This means that a short-seller of these puts would only be forced to buy the stock if it fell to that point.
However, they would immediately make an attractive yield of 4.0% (i.e., $3.20 / $80.00). This is because the investor posts collateral of $8,000 per put contract sold short, but the account immediately receives $320.00.
Moreover, the investor also has a lower breakeven point, even if the stock falls to $80.00 or lower. For example,
$80.00 - $3.20 = $76.80 breakeven, and
$76.80 / $84.80 -1= -9.4% below the trading price
In other words, by entering an order to “Sell to Open” 1 put contract at $80.00, the investor makes a 4.0% yield on their investment and potentially can buy into DELL stock at a lower price.
The breakeven price has a much higher dividend yield:
$2.10 DPS / $76.80 = 2.73% annual yield
More risk-averse investors could short the $75.00 strike price for a lower yield (i.e., $1.84/$75.00 = 2.45%) over the next month. This strike price has a low 21% delta ratio, implying a low chance of the stock falling to that strike price. In effect, this is for an investor only interested in the high monthly yield play.
The bottom line is that, based on average yield and price/earnings multiples, as well as analysts' price targets, DELL stock has good upside potential. By selling short OTM puts, the investor can set a lower buy-in price target and get paid while waiting.
