This Company Could Pay A 45% Dividend Yield
Friday, February 1, 2012
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This Company Could Pay A 45% Dividend Yield

-- By Paul Tracy

This "Dividend Vault" stock has already raised its quarterly payments 133% since 2011. With a $45 billion cash hoard, I expect those raises to keep coming... (Full Story Below)

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This Company Could Pay A 45% Dividend Yield

In 2009, a select group of companies started doing something extraordinary...

They created a "Dividend Vault" with billions of dollars inside it -- one of the largest cash stockpiles on earth.

They did it because these companies are seeing the same problems you are -- a mounting debt crisis in America and Europe... gridlock on Capitol Hill... and a see-sawing stock market that has gone virtually nowhere.

Facing these challenges and many more, they took action to protect themselves and their shareholders.

For the last few years now, they've been adding billions to the "Dividend Vault" at a rapid pace. One of them even poured in $22.9 billion in a single quarter in 2011. With that kind of money being added, you can imagine how big the "Dividend Vault" has become. (To read my previous article on the "Dividend Vault", click here)

Today I'd like to tell you about one of these companies...

This well-known tech giant is one of the world's largest Internet equipment providers. Chances are you're using one of its products right now. However, I'm not here to talk to you about this company's products.

What's important to know is that with a 67% market share, this company dominates its field. In fact, it is by far the largest player in its industry.

It's also involved in a high-margin business. As a result, this company generates massive amounts of cash every quarter. And management is doing everything it can to return that money to investors.

Let me explain...

During one of the most difficult business climates ever, the company has generated net income of up to $8 billion a year and has bought back more than 2 billion shares of stock... including $4.4 billion worth of stock in 2012 alone.

Right now this company is more profitable than such well-known success stories as AT&T (NYSE: T), American Express (NYSE: AXP) and Bank of America (NYSE: BAC)... just to name a few.

That kind of dominance has drawn the attention of the world's top investors.

Donald Yacktman runs a $9 billion mutual fund that has beaten 99% of its peers over the last 15 years. Through the Yacktman Asset Management Company, the billionaire recently added 6 million shares of this company's stock. This makes seven times in two years that the renowned stock picker has increased his position, which now sits at 52 million shares.

Ken Fisher, a billionaire investor and long-time columnist for Forbes magazine, also recently purchased shares of this stock. Through his company, Fisher Asset Management, he added 16 million shares just a few months ago. He now owns more than 66 million shares.

It's easy to see why these billionaires are so high on this stock right now. As of today, this company -- Cisco Systems (Nasdaq: CSCO) -- has accumulated $45 billion in cash... which comes out to a whopping $8.48 per share.

That's enough money to pay every shareholder a 45% special dividend right now.

For years, Cisco has been vaulting away most of this cash. But not anymore...

In 2011 the company announced its first ever dividend payment. And since then, it's already raised its dividend twice, a total increase of 133%. That's enough to turn a $1,000 dividend stream into $2,330.

Even after more than doubling its payout, the company still has $45 billion sitting in its "Dividend Vault." As this vault grows, I think Cisco's payouts will continue to increase for years.

Of course, with investing there's never a surefire thing. There's no quality a company can possess that will guarantee its success.

But when you can find companies like Cisco that dominate their market and are returning billions to investors, these are the sort of stocks that can still deliver strong returns in nearly any market -- including this one.

I recommend buying the stock up to $23 a share with a price target of $33 a share.

[Note: Cisco is just one of 13 stocks I've discovered with an enormous "Dividend Vault." Right now, U.S. companies own a "Dividend Vault" worth over $1.7 trillion. To learn more about my favorite "Dividend Vault" stocks, click here.]

All the best,

Paul Tracy
StreetAuthority Co-founder and Chief Investment Strategist

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Disclosure: Editor Paul Tracy owns shares of CSCO. StreetAuthority owns CSCO as part of Top 10 Stocks' $100,000 Portfolio. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any "real money" model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.


Income Notes

Due to an uptick in one-time dividend payments in December, personal income rose 2.6% that month... the fastest pace in eight years. Personal dividend income jumped 34.3%.

-- MarketWatch


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