Reuters: Global Markets: Cisco shares rise as dividend hike eclipses sales worries

Reuters: Global Markets Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Cisco shares rise as dividend hike eclipses sales worries Aug 16th 2012, 11:40 Thu Aug 16, 2012 7:40am EDT (Reuters) - Shares of Cisco Systems Inc (CSCO.O) looked set to open up 7 percent on Thursday after the network equipment maker's dividend hike overshadowed a lackluster quarterly sales performance and prompted several brokerages to raise their price targets on the stock. Shares of the company, which closed at $17.35 on the Nasdaq on Wednesday, rose to $18.49 in premarket trading on Thursday. The stock had fallen 11 percent after Cisco reported a weak third-quarter profit in May. Cisco said on Wednesday it will raise its quarterly dividend by 75 percent to 14 cents per share after reporting fourth-quarter revenue largely in line with analysts' estimates. It also said it bought back $1.8 billion worth of shares in the quarter. Barclays Capital analysts said the higher dividend suggested a significant shift in direction and placed Cisco near the high-end of its large-cap IT tech peers such as Hewlett-Packard Co (HPQ.N), Intel Corp (INTC.O) and Microsoft Corp (MSFT.O) in terms of dividend yield and free cash flow. "The 75 percent increase in dividend and commitment to return at least 50 percent of free cash flow in dividend and buybacks was not expected given high offshore cash balance and should be rightly viewed as sign of overall confidence on part of Cisco," said Citi Investment Research analyst Kevin Dennean. Barclays and BMO Capital Markets both raised their price targets on the stock by $1 to $22. Citi raised its price target by $2 to $21. BMO analyst Tim Long said he expects the buybacks to continue, but at a slower pace than in the fourth quarter. U.S. TURNAROUND A faltering U.S. recovery and weakness in Europe has hit network equipment makers as their biggest customers -- telecom service providers -- cut spending and delayed purchases of new equipment. Cisco seemed to have little hope on Wednesday that the dire economic conditions in Europe would come to an end any time soon but said it expects spending at customer AT&T Inc (T.N) to increase in the second half of 2012. Analysts believe the growth in the company's U.S. business will offset the weakness in Europe over the next several quarters. Revenue from the Americas rose 7 percent in the fourth quarter. "There are clear signs of a turnaround in the U.S. business across verticals, and this more than offset the continued weakness in Europe," BMO's Long wrote in a note to clients. (Reporting by Chandni Doulatramani in Bangalore; Editing by Sreejiraj Eluvangal) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions