Cisco Systems Inc., the largest manufacturer of computer networking equipment today reports a 4.4% increase in sales even as Southern Europe is still negotiating an ongoing recession while government customers both in Europe and the United States are holding back.
Wall Street analysts are surprised by the company’s resurgence, especially after it revealed that its raising its dividends to 75 percent. The recent quarterly dividend of 14 cents per share translates to an annual profit of 3.2 percent of the company’s stock price, which is a relatively high yield for a tech company. The tech giant started paying a dividend last April 2011.
Although analysts’ expectations were muted, the higher dividend does not mean Cisco is shelling more cash, since it has a buyback program which could reduce the rate of buybacks to allow faster release of cash for the dividend.
Cisco also announced that 50 percent of its current free cashflow will be returned to shareholders. Free cash flow is economics speak for the cash a company pulls in after all the expenses and capital investment. The company returned about $5.9 billion to its shareholders in the form of buybacks and dividend after the latest fiscal year ended.
Cisco Systems declared that it amassed about $1.9 billion, translating to 36 cents per share, during the last fourth quarter spanning from May to July. During the same quarter last fiscal year, the company earned about $1.2 billion or 22 cents per share.
Cisco boasts that it would have earned 47 cents per share if the company did not invest in restructuring costs, stock-based compensation, and other items.
Overall, Cisco’s earnings put it 2 cents above the predicted average estimate of analysts led by FactSet. Revenue was also boosted to $11.7 billion, also beating the prediction of Wall Street. However, the 4.4 percent growth is still below the company’s long-term goal of hitting 5 to 7 percent growth.
The company expects to earn $11.5 billion to $11.9 billion this coming quarter after it purchased NDS, a video company Cisco bought this year.