The Daily Dividend: The One-Time Dividend (CSCO, MSFT, HPQ, INTC, YHOO)

Investing

Published: March 18, 2011 11:04 am

Last Updated: April 14, 2020 3:55 pm

We have some food for thought in today’s “The Daily Dividend” for investors. This morning brought news that Cisco Systems, Inc. (NASDAQ: CSCO) was initiating a $0.06 per share per quarter payout. The dividend was underwhelming for many reasons. A point that may be considered again is what Microsoft Corporation (NASDAQ: MSFT) will do with its payouts.

Microsoft recently approved its same $0.16 quarterly dividend. With a $24.90 share price, Microsoft has a dividend yield of about 2.57%. That compares to the near-1.4% yield of Cisco. The only thing that makes Cisco’s payout look good is if you consider that, even after a hike, the new payout for Hewlett-Packard Co. NYSE: HPQ) is still only about 1.2%. Intel Corporation (NASDAQ:INTC) has a 3.5% dividend yield.

Back to Microsoft Corporation (NASDAQ: MSFT)… Microsoft lifted its dividend late in 2010 to $0.16 from a prior $0.13 payout which was in place for two years. We have either been expecting a large one-time dividend or a mega-buyback for over a year now. Its billions would easily accommodate another $3.00 special dividend. The question is whether or not investors would cheer the move.

We are curious about on issue that is “the other alternative.” Microsoft probably cannot get away with an acquisition that would greatly move the needle. Steve Ballmer probably doesn’t want to operate with a DOJ official sitting right next to him 24/7. We do not know if the DOJ would have actually allowed that failed acquisition of Yahoo Inc. (NASDAQ: YHOO) or not. Another issue is that much cash would need to be repatriated and that comes with unfavorable tax consequences.

Microsoft sits on a mountain of cash. All things being equal, Microsoft can either raise its dividend massively or it can declare a one-time dividend again. Worse things have happened for shareholders.

JON C. OGG

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