What a 2% Dividend Yield Would Look Like at Five Big Techs

Cash dividendsIt seems there comes a time in every big, successful company's life when at least some shareholders start clamoring for a dividend. Cisco (CSCO) CEO John Chambers started talking about initiating a dividend about two years ago, and this week his company finally pulled the trigger. The world's biggest maker of networking equipment said it plans to begin paying an annual dividend with a yield of 1% to 2% by the end of next July.

What took Cisco so long? Well, apart from uncertainty over the states of the economy and credit markets, there are lots of advantages and disadvantages to dividends for both companies and shareholders alike. On the one hand, dividends are hard cash payments to shareholders that can't be faked like earnings. Less attractive is the fact that dividends are taxed twice -- first as corporate earnings and then as personal income.


The list of pros and cons goes on and on, and we're not really interested in that debate here. Rather, we're interested in what isn't up for debate: other big-name tech companies that could afford to start paying a dividend -- but choose not to. Let's take Cisco as a template and apply it to five tech giants that don't pay dividends: Apple (AAPL), Dell (DELL), eBay (EBAY), Google (GOOG) and Yahoo (YHOO).

At Cisco's current share price, an annual dividend yielding 2% would come to 45 cents a share. Multiply that by the number of shares outstanding, and Cisco would have to pay out a total of about $2.5 billion in cash. The company currently sits on about $39 billion in cash and short-term investments, so the dividend payment would equal about 6% of Cisco's cash stash.

That would still leave plenty of money leftover to do deals -- and sponge up stock options through buybacks, if need be -- even with Cisco's $15 billion in total debt.

By this reckoning, have a look at what a 2% yield would amount to for these five dividend holdouts:

Apple
Annual dividend per share: $5.44
Total payout: $5 billion
Cash and short-term investments: $24 billion
Payout as percentage of cash: 21%
Total debt: None

Dell
Annual dividend per share: 25 cents
Total annual payout: $485 million
Cash and short-term investments: $12.4 billion
Payout as percentage of cash: 4%
Debt: $5.26 billion

eBay
Annual dividend per share: 47 cents
Total annual payout: $616 million
Cash and short-term investments: $4.9 billion
Payout as percentage of cash: 13%
Total debt: None

Google
Annual dividend per share: $9.62
Total annual payout: $3 billion
Cash and short-term investments: $30 billion
Payout as percentage of cash: 10%
Total debt: None

Yahoo
Annual dividend per share: 28 cents
Total annual payout: $378 million
Cash and short-term investments: $2.8 billion
Payout as percentage of cash: 14%
Debt: $140 million

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toosmart4u

There are over 2,000 corporations that pay no federal tax at all and get a rebate from the IRS. Exxon Mobile paid no taxes and received 157 million refund from our IRS. That is 157 million dollars of hard working Americans paid in taxes.

September 18 2010 at 8:51 AM Report abuse rate up rate down Reply
ptleming

This is an absolutely moronic analysis. It explicitly assumes that these companies - AAPL, GOOG, etc. - can only pay dividends out of cash on the balance sheet. It completely ignores the fact that these companies generate tremendous excess cash from their operations each year. These companies can institute dividends without ever touching the cash on their balance sheet. Tech companies have not gotten out of the Stone Age when it comes to figuring out how to deal with the excess cash tehy generate from operations. All they know is to keep piling it up on their balance sheet and earn a whopping 15 or 20 basis points. It's way past time that these companies figure out real cash redeployment strategies.

September 17 2010 at 10:46 PM Report abuse +1 rate up rate down Reply
kaybea123

please tell me why, if people understand the maneuvering of big corporations, they still vote for their servants, the republicans.

September 17 2010 at 6:25 PM Report abuse rate up rate down Reply
1 reply to kaybea123's comment
cecljohn

THE ANSWER TO YOUR STATEMENT IS IN THE CURRENT ISSUE (SEPT 27, 2010) OF "FORBES" ENTITLED OBAMA "HOW HE THINKS", VERY REVEALING AND FACTUAL. WHILE THE "REPUBLICANS" HAVE THEIR FAULTS, THEY ARE STILL AMERICANS, I CAN'T BE THAT SURE ABOUT OUR CURRENT PRESIDENT. JUST READ THIS ARTICLE AND TELL ME IF I AM WRONG. JHF

September 18 2010 at 1:40 PM Report abuse -1 rate up rate down Reply
bunnyfunny47

While the corporations are busy bulking up making huge profits they do little to nothing but rip off America. Can't find American workers they claim, yet the true fact is, Our American engineers are standing about in endless unemployment lines where they were sent by the same corporations that say they can't find them. American engineers can't find any jobs because the corps are only advertising them on H1B and various other Visa web sites, or recruiting foreign students right from our own collages they happen to be attending. Our government needs to hit these corps hard by taking away all the tax breaks and benifits whey now receive when they insource thried world wokers into America to replace our own people. What most people don't know is, these corporporations are busy in assisting these workers in obtaining green cards so they can stay in this country. So while all the attention seems to be focused on our border to the south, not a - - is being done to address this other issue. "Put America First"

September 17 2010 at 1:37 PM Report abuse +1 rate up rate down Reply
brgreen8424

Congress needs to address this. Legislation should be written into the tax code that encourages dividend payment not discourage it. The respending of money is what helps the economy grow not hoarding it, like companies are encouraged to do now. How much more cash is being pulled out of the economy because of this policy? How much cash did AB have when it became Inbev, that moved out of the country. Chrysler had $8B that went to Daimler and to Germany, out of the country, after the merger. To realize a gain in a stock an investor should not have to sell it, especially since it should be viewed in the long term. When a company has too much cash the executives try to reinvest it in ventures that are outside their area expertise and fail. This is a practice that should be stopped and a change in the tax code will help.

September 17 2010 at 11:58 AM Report abuse +1 rate up rate down Reply
steffenjobbs

Screw Cisco and their dividend. Approximate share price of Cisco $25, going to $28. Approximate share price of Apple, $275 going to $350+. Keep the dividend, I'll take my stock value. Fools that don't run a top tech company should keep quiet. Wow! Cisco shareholders due for a dividend... Middle of next year! Good for them. I hope they're around to collect.

September 17 2010 at 10:13 AM Report abuse -3 rate up rate down Reply
kv37

Stocks that think they are hot stuff don't think they need to pay a dividend. Like AAPL.

September 17 2010 at 9:22 AM Report abuse +3 rate up rate down Reply