Why Cisco's Dividend Boost Isn't Enough

The networking giant's sales are going down, while its dividend is headed in the other direction. But its dividend should be growing even faster.

Feb 19, 2014 at 6:34PM

Cisco's (NASDAQ:CSCO) struggles aren't over yet. The networking giant saw its revenue shrink by 8% last quarter, and management sees the sales weakness persisting into this year. However, shareholders also got a bit of good news in Cisco's quarterly report: The company boosted its dividend by 12% to an annual pace of more than $1 billion.

In the video below, Fool contributor Demitrios Kalogeropoulos argues that, as impressive as it sounds, that dividend boost isn't enough to keep Cisco's payout on pace with other Dow giants like General Electric (NYSE:GE) and IBM (NYSE:IBM), which dedicated significantly more cash last year toward dividend payments. Cisco's payout ratio also lags the overall market and could stand to rise closer to GE's 55%, he says, which could happen through a scaling-back of Cisco's aggressive spending on share repurchases.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of General Electric Company and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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