Tech stocks drove the Dow Jones Industrial Average’s (INDEX: ^DJI ) gains today, and there was one major driver in particular: Cisco (Nasdaq: CSCO ) . The company reported solid earnings last night, beating the previous quarter, while falling a bit short on estimates for next quarter.
However, the big driver in Cisco’s nearly 10% share price gains today was the company’s announcement of a 75% dividend increase, and its plan to return 50% of free cash flow to shareholders. Cisco’s newfound love for dividends was enough to spur a rally across tech stocks, especially networking peers of Cisco and other tech giants paying dividends.
MSFT data by YCharts
Source: YCharts
More to love than Cisco?
Beyond Cisco’s announcement of advancing its dividend, the company also reported a 17% growth in revenues to U.S. state and local governments. Along with nice growth to large businesses, Cisco’s growth was enough to show that there might be light at the end of the tunnel for big IT companies. Beyond Cisco, storage peer NetApp (Nasdaq: NTAP ) also reported last night and beat estimates, while giving stronger-than- expected guidance for next quarter.
Cisco and NetApp’s combined results were enough to send peers like EMC soaring; EMC rose 3.2% itself on the day. The overall effect of last night’s earnings was that 68 out of 71 tech stocks in the S&P 500 saw gains, while the Nasdaq (INDEX: ^IXIC ) led the three major American indexes with a 1.04% gain on the day.
After-hours trouble?
However, while tech earnings last night led to surging markets today, earnings out of the sector tonight may not breed such optimism. Marvell (Nasdaq: MRVL ) , a semiconductor company, which has recently gained attention, thanks to David Einhorn’s continuing investment in it, announced earnings that fell below expectations. The company has a huge market share in hard drive controllers, but has struggled in recent years as large mobile customer Research in Motion saw its sales fall off a cliff.
I’m inclined to say that Marvell’s problems are company specific. Its hard drive controller chips are sold mainly to PCs, which is a market that’s continually weakening. Not only that, but Marvell has counted on growth by selling dual-processor and wireless chips to China, an increasingly competitive market.
In any case, it looks like any earnings savior from the market tomorrow won’t be coming out of tech.
Keep the long-term view
That’s it for today’s check-up. Cisco drove gains in the Dow today, thanks to increasing its dividend, but don’t forget there are a whole host of Dow companies built for the long haul. To discover some other great dividend payers in the Dow, check out our new report “The 3 Dow Stocks Dividend Investors Need.” It’ll give you three dividend paying stocks with long-term greatness, but it won’t be available forever. Just click here to grab your copy today!
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