Cisco Systems Inc, the world’s largest maker of networking equipment, said its first cash dividend ever will be 6 cents a share, aiming to give a boost to investors after the shares fell 35 per cent in the past year.
The dividend will be paid on April 20 to shareholders of record on March 31, the company said in a statement today. The indicated dividend yield is 1.4 per cent, according to Bloomberg data. Cisco said in September it plans to start a dividend with a potential yield of 1 per cent to 2 per cent.
Cisco is returning cash to investors as its sales growth lags behind its long-term target of 12 per cent to 17 per cent amid competition from Hewlett-Packard Co and Juniper Networks Inc. Cisco had about $40 billion in cash and short-term investments as of January.
“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,” Ari Bensinger, an equity analyst at Standard & Poor’s in New York, said in a note to clients. Bensinger advises investors to buy the shares.
Flush with cash
The fastest economic expansion in six years is prompting US companies to reward shareholders with payouts. At least 95 companies have raised dividends so far this year, partly due to increasing profitability. Profit margins in 2011 will climb to the highest level in at least 18 years, giving businesses a stockpile of cash, according to data compiled by Bloomberg.
Cisco was the only company in the Dow Jones Industrial Average that didn’t pay a dividend. The average yield for the 30 companies in the index is 2.6 per cent, according to Bloomberg data. With more than 5.53 billion shares outstanding as of February 17, the payout will cost Cisco $331.7 million a quarter.
