There's a new dividend payer in town: Cisco Systems Inc. announced on Tuesday that the company would start to pay a dividend to shareholders in its current fiscal year, with a yield somewhere between 1 per cent and 2 per cent. Based on the stock's price on Tuesday afternoon, that would imply an annualized payout of 21.7 cents to 43.4 cents per share.
The announcement drove up Cisco's share price, but it doesn't come as a complete surprise. John Chambers, Cisco's chief executive officer, previously said that a dividend was only a matter of timing. As well, Cisco is one of those cash-rich companies that has long had investors speculating over potential uses of that cash, which currently totals about $40-billion (U.S.).
Jon Ogg at 24/7 Wall Street characterized the move as one in which the company buckled to shareholders, who have long demanded that capital be returned to them -- in cash. Curiously, the move comes just a day after a report suggested that Microsoft Corp. might also be working on plans to return more of its cash hoard to shareholders.
But as Mr. Ogg points out, Cisco's announcement puts pressure on other cash-rich but dividend-stingy blue-chip technology companies, such as Amazon.com Inc. , Apple Inc. and Google Inc.
"The pressure is on," Mr. Ogg said. "It's time for technology managers to get those corporate chequebooks out and start rewarding their shareholders just like other companies have to. What has been witnessed in this move is the maturity of a sector."