NEW YORK (CNNMoney.com) -- Cisco Systems Inc. said on Tuesday that it will begin to pay a dividend yielding between 1% and 2% in the current fiscal year, which ends in July 2011.
Though the move isn't surprising, given CEO John Chambers' pledge in June to pay a dividend when the stock market regains strength, it's a break from Cisco's past policy. The company, which has never before paid a dividend, has previously stated that it believes acquisitions and investments make better use of its cash than dividends or stock buybacks.
But even as the company has made many large investments this past year, its cash stash continues to grow. Cisco is sitting on $39.8 billion of cash, according to its latest quarterly filing to the Securities and Exchange Commission.
That's the largest cash pile in the tech industry, and much bigger than that of many Cisco peers that pay dividends, including Microsoft (MSFT, Fortune 500), Oracle (ORCL, Fortune 500), Intel (INTC, Fortune 500), Hewlett-Packard (HPQ, Fortune 500) and IBM (IBM, Fortune 500).
Some companies feel that there is a negative stigma associated with paying a dividend -- it calls up images of an entrenched, slow-to-grow behemoth. But that's hardly the case with Cisco, which Wall Street expects to grow its revenue and profit by double digits this year and next.
Cisco didn't say exactly how much it planned to pay per share. Based on the current stock price and Chambers' target for a yield, the dividend would be between 5 cents and 11 cents per share per quarter, but that's likely to change as the stock price moves up or down.
The Federal Reserve is probably not going to raise interest rates until the summer of 2015 at the earliest. More
Immigrant entrepreneurs leverage connections abroad to boost international exports -- and non-immigrants could stand to learn from their tactics. More
Occupy Wall Street offshoot Strike Debt says it has abolished nearly $4 million in private student loan debt for students who attended Everest College, part of Corinthian Colleges. More