The wealth-building power of compound interest will never cease to amaze me. It’s a story of patience and attention to detail, where small, short-term differences add up to massive divergence over decades. And in the end, the biggest winners don’t always deliver the fattest share-price returns.
Today, I’m looking at the Dow Jones Industrial Average (INDEXDJX:.
A dividend history of less than two and a half years isn’t much to hang your hat on, historically speaking. But Cisco Systems, Inc. (NASDAQ:CSCO) has already shown some signs of nurturing a healthy dividend policy for the long term. Specifically, Cisco Systems, Inc. (NASDAQ:CSCO)’s payouts have grown like ragweeds since that first tentative payout.
Cisco’s dividends per share more than doubled in the first year and then doubled again a year later. That’s an impressive commitment to stronger shareholder returns, and dividend payments now rival Cisco’s generous share-buyback program in size. All things considered, the current 2.9% yield is comfortably above the Dow Jones Industrial Average (INDEXDJX:.DJI)’s 2.7% average yield. It’s not a huge lead, but any advantage is impressive when you’re comparing yourself to the market’s elite group of companies.
That’s a nice start, but Cisco Systems, Inc. (NASDAQ:CSCO)’s dividend story is not all wine and roses. The strong yield rests not only on generous payout policies, but also on a weak share price. In short, Cisco has been running in turnaround mode for the last several years, and you would have been better off owning a simple Dow-tracking fund throughout Cisco Systems, Inc. (NASDAQ:CSCO)’s dividend era.
So the big question for income investors is: Will Cisco Systems, Inc. (NASDAQ:CSCO) be able to pull itself up by the bootstraps and keep growing those quarterly checks?