Cisco announces first dividend
Friday, March 18, 2011; 6:23 PM
NEW YORK -- Cisco Systems Inc., the world's largest maker of computer networking gear, on Friday said its first-ever cash dividend will amount to 6 cents per share and will be paid on April 20.
The company has said since last year that it would start paying a dividend equating to an annual yield of 1 percent to 2 percent, but had not specified the amount or precise timing.
The dividend amounts to an annual yield of 1.4 percent at Thursday's closing price of $17. The shares hit a 52-week low of $16.97 in Thursday trading.
On Friday, the shares were up 14 cents to close at $17.14.
The dividend will be paid to shareholders of record as of March 31.
Technology companies like to hold on to their cash, investing it in their own growth rather than paying dividends. But several of them have started paying small dividends as they find their business maturing. Microsoft Corp. introduced a dividend in 2003 and now carries a 2.6 percent annual yield. Hewlett-Packard Co., which competes with Cisco in many fields, has a yield of 0.8 percent.
Among the holdouts that don't pay a dividend are Apple Inc., Dell Inc. and eBay Inc.
San Jose, Calif.-based Cisco said its "leadership position in the markets we serve is strong," making this the time to reward shareholders.
The dividend amounts to $1.3 billion annually. Cisco has already been transferring cash to shareholders through stock buybacks, at a rate of about $8 billion per year, according to analyst Brian White at Ticonderoga Securities. Most recently, Cisco authorized a $10 billion buyback program in November.
Cisco had $40.2 billion in cash in February, but only $3.1 billion of that was in the U.S. The rest sits at overseas subsidiaries.
Cisco has been reluctant to repatriate that money, because it will then be taxed at the 35 percent U.S. corporate tax rate. It's lobbying Washington for a tax amnesty on overseas earnings, and CEO John Chambers has linked that effort to the size of the dividend.
White said buybacks at the current rate plus the dividend will cost Cisco $6.5 billion to $7 billion more than its U.S. business generates in cash flow. Absent a tax amnesty, Cisco might have to repatriate money at the higher tax rate, borrow money or reduce its buybacks, White said.