Sunday, March 20, 2011

Cash-Rich Cisco to Begin Paying Dividend

Right on track as we saw in Aussie after the crisis companies starting to pay dividends.

Cash-Rich Cisco to Begin Paying Dividend

Cisco Systems Inc. finally heeded to years of investor clamoring and approved its first-ever dividend, the latest technology giant to do so as its business matures.

Cisco has finally heeded to investor clamoring and will pay a quarterly dividend of six cents a share to shareholders. The payout comes following several disappointing quarterly earnings reports, and as Cisco faces questions about the strength of its core networking business.
.Cisco will pay a quarterly dividend of six cents a share. The company will make the payment on April 30 to shareholders of record on March 31.

The networking giant, like many of its technology peers, has long built up a war chest of cash and investments. As of Jan. 29, the company had $4.9 billion in cash and $35.3 billion in investments. The dividend would cost the Cisco some $335 million a quarter.

The dividend payout comes as Cisco faces questions about the strength of its core networking business. Cisco has been combating the notion that it is no longer a growth company, exacerbated by several quarters of disappointing results. Cisco shares recently rose 1.9% to $17.32. The stock has been down roughly 35% over the past year.

"Cisco's leadership position in the markets we serve is strong, and the time is right for Cisco to pay our first-ever cash dividend," Chief Financial Officer Frank Calderoni said.

Cisco first said in September that it would begin paying a dividend, targeting a yield of 1% to 2%. At the time, Chief Executive John Chambers said the dividend would be funded through cash generated from its North American operations.

Standard & Poor's equity analyst Ari Bensinger said the current amount would result in a 1.4% yield. "We like that Cisco is increasing its commitment to enhancing shareholder value and putting some of its large $40 billion cash stockpile and strong free cash flow generation to better use," Mr. Bensinger said in a note.

Cisco previously used its cash stockpile to make acquisitions, such as the $3.3 billion purchase of teleconferencing company Tandberg. On Monday, it purchased digital media company Inlet Technologies for $95 million in cash. It also preferred repurchasing stock over dividends.

Much of the company's cash, however, is held overseas as a result of its extensive global operations. Chief Executive John Chambers has long been a proponent of eliminating taxes for companies looking to repatriate that cash.

Cisco follows other technology titans that began paying a dividend. Microsoft Corp. began issuing a dividend in 2003. In 2009, Oracle Corp. began paying a dividend.

A host of companies have been ramping up shareholder-friendly moves such as dividend increases and stock buybacks as corporate cash piles have recovered and financial uncertainty in the immediate wake of the crisis has waned.

Write to Roger Cheng at

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

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