Cisco Rasies its Dividend 75%

Although Cisco would not qualify for our list of Best Dividend Growth Stocks because we like a 25 year history of consecutive dividend increases, and Cisco started paying dividends in April 2011. Cisco raised its dividend from 8 cents per share to 14 cent per share a 75% increase! The new quarterly dividend of 14 cents per share represents an annual yield of 3.2% of Cisco’s stock price, a relatively high yield for a technology company.

It is good to see another tech powerhouse strengthen their commitment to sharing their profits with their shareholders in the form of increasing their dividend. Wednesday’s announcement reflects Cisco’s transition from a fast growing business to a more mature one that’s subject to the same cycles as major industrial manufacturers. It no longer needs to invest as much of the cash it makes in its own business, so it can give it to shareholders instead.

Cisco said it’s committing to returning to shareholders at least 50% of its free cash flow (the cash it pulls in after expenses and capital investment). In the fiscal year that just ended, it returned $5.9 billion to shareholders in buybacks and dividends, which was already more than 50% of free cash flow.

Other large technology companies that have made the transition from a high growth company to a mature cash generating machine with strong economic advantages; where the companies free cash flow is better spent in the form of dividends are Microsoft and Intel. It will be interesting to see if these tech companies can establish a long history of consecutive annual dividend increases through good and bad economic cycles.

Filed in: Dividend Increase Announcements
Tagged with: Dividend Increases • featured