What Tech Industry Trends Are Impacting Cisco's Performance?
Share repurchase and dividend yield
In the first half of fiscal 2016, Cisco (CSCO) returned $4.6 billion or 75% of its free cash flow to shareholders. The $4.6 billion comprised $2.5 billion in share repurchases and $2.1 billion in dividends. Cisco also announced a 24% or $0.05 YoY (year-over-year) rise to its quarterly dividend, to $0.26 per share.
Cisco announced an authorization increase of $15 billion for its share repurchase program, raising its remaining share repurchase authorization to approximately $16.9 billion. Cisco’s CEO Chuck Robbins said, “This significant dividend increase and additional share repurchase authorization reinforces our commitment to returning capital to our shareholders and our confidence in the strength and stability of our ongoing cash flows.”
Cisco’s dividend yield rose from $0.17 fiscal 2Q13 to $0.19 in fiscal 2Q14 and $0.21 in fiscal 2Q15. Cisco increased its dividend yield 11.8% YoY in fiscal 2Q14, 10.5% YoY in fiscal 2Q15, and 24% YoY in fiscal 2Q16. This was a rise of 53% over the last three years.
Peers’ dividend yields
IBM (IBM) increased its dividend yield 11.8% YoY in 1Q14, 15.8% YoY in 1Q15, and 18.2% YoY in 1Q16. This was a rise of 53% over the last three years.
EMC (EMC) increased its dividend yield 15% YoY in 1Q15 to $0.12. Its yield has been unchanged since then.
While Cisco has a dividend yield of 3.7%, IBM, EMC, and NetApp (NTAP) have dividend yields of 4.1%, 1.7%, and 2.7%, respectively.
IBM accounts for 2.9% of the Technology Select Sector SPDR ETF (XLK).
Browse this series on Market Realist: