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Cisco Bondholders OK with Dividend

Companys debt has moved in line with other bonds since the hike in payout announced.

By Mary Childs, Bloomberg | Updated on August 17, 2012

Bondholders are giving Cisco Systems Inc. a free pass on its plan to reward shareholders with half its free cash flow this year as the biggest maker of computer-networking equipment cuts prices and jobs to increase profit.

Cisco’s bonds are trading at levels that imply it should be rated Aa2, according to Moody’s Corp.’s capital markets research group, two levels above its actual rating of A1. Cisco’s fourth-quarter results beat analysts’ estimates, and executives said this week that the company will raise its dividend 75 percent as part of a plan to reward shareholders with at least half the cash generated from operations.

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