After Cisco: 5 Tech Giants With Enough Free Cash Flow to Initiate or Raise Dividends

|
 |  Includes: AAPL, CSCO, DELL, EBAY, MSFT, ORCL
by: Investment Underground

After Cisco announced it would start paying a quarterly dividend for the first time ever last week, we decided to take a look at the other tech giants in the marketplace to see they're next. Here's what we discovered:

Microsoft (NASDAQ:MSFT): Microsoft Corporation develops, manufactures, licenses, and supports a range of software products and services for various computing devices worldwide. Microsoft’s market cap is 208.38B and their dividend yield (rate) is 0.64 (2.5%). The next dividend will be paid June 8, 2011.With regard to the last ten years' financial statements, the trends of free cash flow, net margin percentage and return on equity are increasing. Therefore, Microsoft has room to raise its dividend through 2012. Microsoft holds over $40 Billion in cash on its books. It is time for the company to return more of its cash to investors.

Oracle (NASDAQ:ORCL): Oracle Corporation, an enterprise software company, develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide. Oracle’s market cap is 155.41B and its dividend yield (rate) is 0.20 (0.6%). Oracle initiated its dividend in 2009. The last dividend date was on Jan 14, 2011. Oracle has the potential to increase its dividend, funded by 25 Billion in cash on its books.

Dell Inc. (NASDAQ:DELL): Dell designs, develops, manufactures, markets, sells, and supports computer systems, as well as provides related services worldwide. It offers desktop PCs; notebook computers, mobile workstations, and smartphones; servers and networking products; storage solutions, including storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup; and printers and displays. Dell’s market cap is 27.92B and it does not pay a dividend. Dell should initiate a first dividend because this world’s largest PC maker is hoarding more than $13 billion in cash in its coffers — more than enough to fund a substantial dividend payout. In addition, its free cash flow increased from $3,073 millions in 2007 to $3,525 million in 2011. In summary, Dell has enough cash to pay a dividend.

eBay Inc. (NASDAQ:EBAY): The company and its subsidiaries provide online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and businesses in the United States and internationally. eBay’s market cap is 39.56B and it is also a dividend hold-out. eBay should pay a dividend because it has done little to inspire investor confidence. eBay would be wise to initiate dividend payouts to attract a solid base of long-term investors and help attenuate share volatility. A healthy dividend payout could help this company rise from the doldrums in which it has been stuck for several years. Additionally, eBay’s free cash flow increased from $1,732 millions in 2007 to $$2,022 millions in 2010. It is time for eBay to return cash to shareholders.

Apple Inc., (NASDAQ:AAPL): Apple, together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Apple’s market cap is 304.64B and remains a dividend holdout. The company generated operating cash of $9.8 billion, resulting in cash and marketable securities of $59 billion. It has enough cash to pay dividends and should begin rewarding shareholders through a payout.

Cisco (NASDAQ:CSCO): Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Cisco’s market Cap is 94.75B and there is no current dividend yield to-date. However, on March 18, 2011, Cisco initiated its first-ever cash dividend, which will amount to 6 cents per share and will be paid on April 20. The company indicated last year that it would start paying a dividend equal to an annual yield of 1 percent to 2 percent, but had not specified the amount or precise timing. The forward dividend amounts to $1.3 billion annually. Cisco has already been transferring cash to shareholders through stock buybacks, at a rate of about $8 billion per year. Most recently, Cisco authorized a $10 billion buyback program in November. With most of its cash overseas, a repatriation tax holiday would be favorable to Cisco shareholders.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.