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Cisco declares a dividend! Did Hell freeze over?
Old 09-14-2010, 11:33 AM   #1
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Cisco declares a dividend! Did Hell freeze over?

Wow - finally, after 10 years of going nowhere in price, Cisco finally decides that in 2011, "the time is right" to start paying a dividend on their stock. Pretty ironic, as that is when qualified dividends no longer have special tax treatment.

Quote:
"We believe that returning capital to shareholders -- particularly in the form of an ongoing dividend -- provides Cisco shares a catalyst to expand the shareholder base with yield-oriented investors," from Cisco analyst Cisco will issue a dividend with 1%-2% yield - MarketWatch
Hah! This is funny to me. They sure took long enough.

I think this really signals that companies get it that the investor has changed and is not willing to sit around waiting for "growth". Of course, they finally realize that investors have left stocks in droves to buy income yielding bonds instead.

I guess Hell would perhaps really be frozen if Apple declared a dividend. But then Apple can still claim to be a strong growth company and they have rewarded shareholders handsomely over the past decade. Unlike Cisco.

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Old 09-14-2010, 01:23 PM   #2
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Wow - finally, after 10 years of going nowhere in price, Cisco finally decides that in 2011, "the time is right" to start paying a dividend on their stock. Pretty ironic, as that is when qualified dividends no longer have special tax treatment.
Could be worse-- they could be going on a spending spree like HP & Intel, or on a hiring spree like Oracle with Hurd.

Never thought I'd find Cisco & Microsoft lurking in the value-stock bin...
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Old 09-14-2010, 02:30 PM   #3
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Never thought I'd find Cisco & Microsoft lurking in the value-stock bin...
Yeah they've been stuck in the mud for a long while!

I don't know about HP, but I never try to second guess Larry Ellison.

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Old 09-14-2010, 02:33 PM   #4
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Since my career was a Network Engineering Team Manager in the mid 80s till ESR in 2007 I had lots of experience with Cisco. I loved their equipment.

I also bought their stock heavily in the early 90s. I sold them Microsoft, and Network General which were my top three holding in 1998. The tax due pretty much sent me to the hospital but it sure help the FIRE plan and that was the last of my single stocks. I was switching to Mutual Funds then.

Being in the Industry it was easy to see that in Cisco's case that a stock I paid in the teens for and sold in the low eighties after several splits was overpriced just a little!

Some family members would not listen though and rode them back down and then held for several more years till they finally gave up and sold but then it was my fault since they bought them on my advice! Selective memory can be a problem sometimes.
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Old 09-14-2010, 09:37 PM   #5
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So a dividend really means a wealth transfer from the company which goes partly to the shareholder and partly to the tax collectors?

It's interesting to compare the dividend yields on equities in markets which have double taxation (like the US) and the higher yields on equities in markets which do not impose double tax (like Australia) or which impose no tax at all (like Hong Kong).
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Old 09-14-2010, 09:55 PM   #6
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So a dividend really means a wealth transfer from the company which goes partly to the shareholder and partly to the tax collectors?
Hard to call it a "wealth transfer to shareholders" since they own the company and that income ultimately belongs to them, regardless of how it is taxed. The "wealth transfer" that usually happens in modern companies is corporate officers rewarding themselves and employees stock options and diluting existng shareholders. And also spending company income to buy back shares in an attempt to offset part of said dilution.

CSCO is a classic study in the above tactics BTW.

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Old 09-14-2010, 11:09 PM   #7
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I don't know about HP, but I never try to second guess Larry Ellison.
Good point-- in the "spouse scumbag of the year" and "unethical executive" competitions between Hurd & Ellison, it's hard to tell who has the lead.
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