Cisco's Dividend Finally Arrives: An Underwhelming Take (CSCO)

Investing

Published: March 18, 2011 8:45 am

Last Updated: April 27, 2020 7:04 pm

Cisco Systems, Inc. (NASDAQ: CSCO) is finally declaring its first dividend ever. Unfortunately, this is what a realist would call a very underwhelming payout. The company approved a quarterly dividend of $0.06 per common share and the payment will be paid on April 20, 2011 to shareholders of record as of the close of business on March 31, 2011.

The company is likely to keep this payout going but it should be noted that the press release notes, “Future dividends will be subject to Board approval.” That won’t exactly generate any huge confidence.

This payout will generate a $0.24 per year payout and the $17.00 share price generates a dividend yield of 1.4% on an annualized basis. We were expecting about a 1.5% payout all along but that was expected to be the yield when shares were higher. Yesterday’s close of $17.00 compared to a 52-week trading range of $16.97 to $27.74.

The obvious move would be to just congratulate John Chambers and other members of management for finally understanding what shareholder-friendly behavior is. The company is still buying back stock in an effort that has failed to generate any proven shareholder value. This dividend is about $0.02 shorter than what it easily could have been. It also doesn’t change the notion that investors are not able to have much clarity of the near-term outlook.

Cisco shares are jumping by 2% to $17.35 in early trading. This is unfortunately a very underwhelming payout. We have recently noted what some of the real dividends in technology look like, some are above 3% as well.

JON C. OGG

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