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Comtech Puts Its Cash to Work—For You
CNBC.com | September 29, 2010 | 07:48 PM EDT

Initiating a dividend remains one of the most bullish signs of a company’s future. After all, businesses aren’t going to kick back cash to shareholders if they need that money to keep the doors open.

This basic premise is the whole reason Cramer likes Comtech Telecommunications , a maker of high-tech communications and services that does a lot of business with the government. Despite a tough summer for both the company and the share price, the fact that Comtech announced a dividend on Sept. 23 makes the stock buyable—just not yet. But more on that later.

Just as important as the dividend, Cramer on Wednesday was trying to teach viewers about how companies use their cash on hand. And Comtech, with $408 million in net cash on its balance sheet, is sitting on a ton.

Typically, companies put that money to work in one of three ways: an acquisition, a stock buyback or a dividend. Comtech tried the first to its share price’s detriment, announcing in May it would pick up radio-frequency amplification play CPI International for $472 million. Too bad the market hated the idea and took the stock down. (A lost government contract in July hurt CMLT, too.) It wasn’t until Comtech killed the deal in early September, in response to government scrutiny and that battered share price, that the stock started to recover.

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