After reporting an encouraging first quarter last month,
Cisco Systems Inc.
), the leading provider of IP-based networking and other
products, has announced its decision to hike quarterly dividend
by three cents to 17 cents per share. This translates into a 21%
increase from the prior dividend.
The increased dividend will be paid on Apr 24, 2013 to
stockholders of record as of Apr 8, 2013. Prior to this
announcement, Cisco had been paying a quarterly dividend of 14
cents per share.
The strength of Cisco's business model is reflected in the
company's strong cash generation capabilities and its commitment
to return value to shareholders. Given its size and scale of
operations, Cisco generates steady cash flows generating
significant returns for investors.
Cisco's strong balance sheet and cash flows provide financial
flexibility in matters of incremental dividend, share repurchases
and strategic acquisitions. During the last concluded quarter,
Cisco spent $500 million on share repurchases and $743 million on
dividends. The cash and short-term investments balance was $46.4
billion at quarter-end.
The debt to total cap ratio including long-term liabilities
and short-term debt was just 22.7%. We remain encouraged by
Cisco's strong cash position and its ability to service its
Cisco reported decent second quarter results, with both
revenues and earnings per share surpassing our expectations. The
company provided a strong revenue outlook for the third quarter,
which is expected to be up 4%-6% on a year-over-year basis.
Cisco's strong position in the computer networking equipment
market, improving business, its huge portfolio and strategic
acquisitions are all positives.
The regular dividend hikes are a good way of encouraging
investor confidence as it returns shareholder value. The increase
in dividend indicates that the company is heading toward strong
future growth. Though the company's margins have been suffering,
areas, including cloud computing, mobile, data center, and others
are witnessing strong growth, which will likely mitigate the
margin slowdown going forward.
Currently, Cisco shares carry a Zacks Rank #3 (Hold). Other
stocks that are performing well at current levels include
Brocade Communications Systems
). While Hewlett Packard carries a Zacks Rank #1(Strong Buy),
both Infinera and Brocade carry a Zacks Rank #2 (Buy).
BROCADE COMM SY (BRCD): Free Stock Analysis
CISCO SYSTEMS (CSCO): Free Stock Analysis
HEWLETT PACKARD (HPQ): Free Stock Analysis
INFINERA CORP (INFN): Free Stock Analysis
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