PALO ALTO, Calif. (CNN/Money) - Investors don't want dividends. That is, if you believe only the surface of what Cisco Systems tells you. To hear Cisco tell it, shareholders rejected a proposal to enact a company dividend by a ratio of 10-to-1. Case closed.

Not so fast. What Cisco's owners actually rejected was a weakly-worded proposal that "a vote be given to the shareholders to declare a quarterly dividend."

In fact, it's easy to see why at least some Cisco stockholders would like to see a dividend. The company has about $21 billion in the bank and even in a period of flat revenues, it's generating upwards of about $4 billion in cash annually.

It's totally unclear when meaningful growth will return to its stock price or its earnings. So some investors, including 200-share holder Barry Carney of Woodbridge, Va., who offered the proposal, would like to see some of that cash returned directly to them.

Cisco, in its own proxy statement to shareholders, offered lots of reasons why it chooses not to pay a dividend. First off, a dividend is the board's decision, not the shareholders. (Hear, hear. Representative democracy is best.) None of this ballot-initiative nonsense. If you don't like the no-dividend policy, don't own the stock.

Cisco also explains that it'd much rather reward shareholders from its cash kitty in the form of share buybacks. In fact, during its fiscal 2002, Cisco bought back $1.9 billion worth of stock, or roughly 26 cents per share. Just for comparison's sake, that would work out at current prices to a 1.8 percent dividend yield. GE's 72-cent dividend yields about 2.9 percent these days, and Procter & Gamble pays $1.64 per share, or about 1.9 percent.

So Cisco, which has authorized an additional $6.1 billion in buybacks, isn't doing so badly by its shareholders in the giveback department.

Now, a more interesting question to have asked Cisco shareholders would have been: "Would you support a dividend if Congress were to enact laws that would make dividends tax exempt, either for the corporation or, up to a certain limit, for shareholders?"

Those are a couple of the proposals floating around Washington, apparently with some support from the Bush administration. Currently, corporations pay taxes on income even though they can deduct interest expense. That makes it advantageous from a tax perspective to borrow rather than to pay dividends to shareholders, who'll have to pay income taxes anyway.

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Of course, the love affair with dividends is relatively new. The bird-in-the-hand payout seems to make investors feel good now that they're seeing negative growth in their stocks. And the fact that so few tech companies pay them is, arguably, depressing the overall market's dividend yield, leading some pundits to think the market is overvalued on a historical basis.

I say change the tax code to make it more attractive for companies to offer dividends. If they still choose not to, well, an investor will at least know where the company stands on the growth-versus-income debate.

This column, like it's author, likes to stay focused on investing themes, rather than trading themes. Investing is about looking for good ideas and staying away from bad ones. It's not about timing.

Having said that, the investor who's paying attention often has the opportunity for a relatively easy trade. In retrospect, the Wall Street smackdown last week of shares of Hewlett Packard on the day Michael Capellas resigned as president turns out to have been such an opening. I wrote a week ago that if you liked HP with Capellas at $17 that it was a bit silly to dislike it without him at $15. The shares actually closed that day at $14.85.

In late-day trading Thursday, before the company reported fourth fiscal quarter earnings, the shares were worth $17.23. That's a 16 percent trade in a little over week that stands to improve if investors like what they hear this afternoon.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.

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