Some do not like one-time dividends.  A steadily higher dividend and a promise to hike dividends down the road offers shareholders a benefit today and a benefit tomorrow from the higher income.  But the one-time dividend only helps holders at the record and payout dates.  One-time dividends can sometimes be bad for future shareholders who have to value a company with less cash.  We wanted to look at one-time dividends of the past and see if these new one-time dividends are good or bad for shareholders on an ongoing basis.

Garmin Ltd. (NASDAQ: GRMN) announced this morning that it will pay a one-time increase to $1.50 in its annual payment rather than $0.75 to holders of record on April 15.  The company is also moving its domicile of incorporation to Switzerland from the Cayman Islands to Switzerland if and after the shareholder vote on May 20.  Garmin has almost $1.8 billion in cash and long-term investments as of the end of 2009, and with roughly 200 million shares, this will take out about $300 million from the company coffers rather than the usual $150 million.

The vote from Wall Street is that this one-time dividend hike, as the company said was due to its strong results and cash position, is good.  If you bought shares yesterday around $35.30, the yield is 4.2%.  If you buy today at $36.65 the yield is about 4.08%.  So far the reaction is a very favorable one.  Shares are up 3.8% at $36.60 but the stock is up on thin volume.

Today’s news on top of other recent dividend hikes and share buyback hikes is only going to add more pressure for other chip stocks to increase their dividend payments and perhaps to keep buying back stock.  Here we are looking at Intel Corporation (NASDAQ: INTC), Xilinx Inc. (NASDAQ: XLNX), Altera Corporation (NASDAQ: ALTR), Texas Instruments Inc. (NYSE: TXN), QUALCOMM Inc. (NASDAQ: QCOM), Broadcom Corporation (NASDAQ: BRCM), Marvell Technology Group Ltd. (NASDAQ: MRVL), Advanced Micro Devices Inc. (NYSE: AMD), Micron Technology Inc. (NYSE: MU), and KLA-Tencor Corporation (NASDAQ: KLAC).  We wanted to compare dividend yields, some brief history, and a potential of whether other dividend hikes will be coming down the road in the various aspects of semiconductors.

Applied Materials at the new dividend rate will yield about 2.25%.  As far as how this compares to other chip leaders, Intel Corporation (NASDAQ: INTC) already yields 3% today after it already raised its dividend earlier this year from $0.14 to $0.158 per quarter.

Then there is Xilinx Inc. (NASDAQ: XLNX), which also pays a 2.4% dividend now that it hiked its dividend from $0.14 to $0.16 in late-2009.  Xilinx has been a higher paying company in the sector for some time.  The other circuit and PLD player that gets grouped with Xilinx is Altera Corporation (NASDAQ: ALTR).  As far as which company has a higher yield, it is not even close.  Altera has a payout of only 0.85% for its dividend yield and it has been far less aggressive in payments to shareholders.

The big trade out there had been in Texas Instruments Inc. (NYSE: TXN).  That company was buying back more stock than almost any chip company for years.  It also raised its dividend in 2009 and the yield there is now 1.9%.  Interestingly enough, QUALCOMM Inc.  (NASDAQ: QCOM) just saw about a 10% recovery after the company raised its dividend and its buyback plan.  It had been in a steady slide lower after average selling prices were heading south ahead.

Broadcom Corporation (NASDAQ: BRCM) only recently embarked upon a dividend paying strategy.  At $0.08 in payments per share per quarter, the yield here is only about 1%.  That comes to $0.32 per year, yet the Thomson Reuters estimates are $1.97 EPS for 2010.  This is just the first of its dividends, assuming the earnings come in close  to estimates, with more than enough dividend coverage for Broadcom to hike its payout.

Of the big communications chip makers and designers, Marvell Technology Group Ltd. (NASDAQ: MRVL) is without a dividend.  Its earnings estimates ahead from Thomson Reuters are $1.50 EPS and $1.66 EPS for the next two years.  It seems that a dividend policy could be coming down the road.  Maybe, maybe not.

Advanced Micro Devices Inc. (NYSE: AMD) and Micron Technology Inc. (NYSE: MU) are still likely farther away than closer to setting quarterly payouts.  Both companies have been in a turnaround mode for years and it is more than understandable that these need to hold on to their cash.  Micron is in a merger, and AMD is… well they are AMD.  It is far too soon to start speculating about or demanding dividends from these two.

Without trying to get too broad, Applied Materials is on the cap-ex side of the semiconductor sector.  On that front KLA-Tencor Corporation (NASDAQ: KLAC) is considered the number two player behind it and KLA has had the same $0.15 dividend since Q3-2007.  So that comes to $0.60 in annual payouts for a 2% dividend yield, but its Thomson Reuters earnings estimates are $1.22 EPS this year (June-end) and $2.24 EPS next year.  Expecting a huge payout boost here may be premature considering that business on the cap-ex side of the chip sector is nowhere near as strong as what we have seen in other aspects of the chip recovery.

These are only some of the major semiconductor and semiconductor equipment players out there.  There are dozens of others which could be named.  The semiconductor recovery is happening and we are seeing selective dividend payment boosts.  An issue to consider is whether the economic recovery holds up or whether it falters if the 2011 tax and spending situation become more finite.

It seems that more dividend hikes (and possibly share buybacks) will come.  But the sector is still in many cases short of its former glory and this week just a year ago was when the investing public was caught somewhere between looking like a deer in the headlights and wanting to jump off a cliff.

JON C. OGG

If that holds, it will be the #4 position in US market cap on our list per Interactive Data calculations for real-time market cap calculations.  We would note that other lists may show it as being ranked #5.  The position is not the point exactly.  The issue that needs to start being considered is the actual market capitalization or market cap.

As far as how Apple ranks, the company is worth more in stock market dollars than JPMorgan Chase & Company (NYSE: JPM) at $169 billion, General Electric Co. (NYSE: GE) at $174 billion, Johnson & Johnson (NYSE: JNJ) at $176 billion, and The Procter & Gamble Company (NYSE: PG) at $184 billion.  These values and rankings of course change each day based upon share prices.

Apple is still far behind the market cap of the #2 position of Microsoft Corporation (NASDAQ: MSFT) at $250.9 billion.  Microsoft’s market cap is deemed by some investors as one of the issues that has prevented its stock from rising year after year as it once did.  But it is not far behind the $206 billion market cap of Wal-Mart Stores Inc. (NYSE: WMT).

Exxon Mobil Corporation (NYSE: XOM) still of course dwarfs all market capitalization rates with a monster figure of $313 billion as its market cap.  Exxon’s biggest problem even during the height of the oil craze is that its stock lagged many of the smaller players.  Some attribute this to the notion that it just took too much investor inflows of capital to keep moving the needle compared to peers with market caps under the mega-cap status.

Sales and sales alone can never be used to show a true value, but it does show how each company contributes to the overall US economy and to GDP.  Thomson Reuters has annual sales expectations for these companies.  Apple sales are expected to be over $53 billion in 2010.  Here is how that ranks in comparison for the other companies in their fiscal 2010:

• Exxon Mobil Corp. is expected to be about $390 billion.
• Microsoft Corporation sales are expected to be almost $61.5 billion (June).
• Wal-Mart Stores Inc. sales expectations are over $428 billion.
• General Electric Co. sales are expected to be over $155 billion.
• Johnson & Johnson (NYSE: JNJ) sales are expected to be over $64 billion.
• The Procter & Gamble Company (NYSE: PG) sales are expected to be almost $80 billion (June-end).

Apple keeps growing and keeps surprising.  It keeps bringing out a cooler and better mousetrap for those who crave consumer electronics.  The iPhone, iPod, iTouch, and Mac are all about to be joined by the iPad.

Does this mean that Apple’s day is over?  No.  In fact, stocks which hit new 52-week highs or all-time highs tend to put in even higher highs.  Only time will be the judge of whether or not Apple’s stock will keep soaring.  But size does matter when it comes to investing, and eventually it starts taking larger and larger sums of money to move the needle in share prices.  Theoretically anyway.

JON C. OGG

VMware’s board of directors authorized the purchase of up to $400 million of its Class A common stock through the end of 2011 in transactions from time to time.  These purchases can be in the open market or through private transactions subject to market conditions.

Usually buybacks are meant to take off excessive shares or to reduce the public float of a common stock.  Effectively, this drives up earnings per share from operations.  But many tech companies have to repurchase shares of common stock in the open market to absorb the shareholder dilution that comes from all those employee stock options as they get exercised.  This is what Cisco Systems and Dell have been known for.  Like it or not, they effectively had to conduct share buybacks to keep employee stock options from constantly adding to the float.

But based upon a recent deal announced where VMware acquired certain EMC operations, all of this seemed to be a prelude to great break-up of the EMC ownership of VMware.  VMware is its own public entity, but EMC owns a super-majority stake in the company.  And also yesterday came a release from EMC Corp. (NYSE: EMC) that it would purchase shares of VMware in a stock purchase program “to allow the company to make open market purchases of VMware Class A common stock in order to maintain EMC’s approximately 80% majority ownership at its current level over the long term” and “… underscores VMware’s role in EMC’s strategic direction.” More importantly said was, “We believe maintaining EMC’s ownership level in VMware at approximately 80% allows us to continue to achieve the above objectives while also maximizing value for EMC shareholders over the long term.”

Intel Corp. (NASDAQ: INTC) and Cisco Systems (NASDAQ: CSCO) also own very small stakes in VMware.

As far as explaining this notion, VMware’s press release noted, “The Company expects the equity purchase program to help partially offset dilution from its equity programs and believes it to be an appropriate use of proceeds from the exercise of employee stock options.” So the vesting and expected exercise of options is the reason.  Thankfully, this is not just a company with a triple-digit P/E out buying shares because it has extra cash and wants to make a statement.

Everything here has seemed like a prelude to EMC monetizing its virtualization leadership in VMware.  But this new effort with ‘long-term’ being noted is meant to dispel the notion that EMC is about to monetize that VMware 80% stake.  VMware has a $20+ billion market cap, meaning that the value to EMC is roughly $16 billion.  EMC’s market cap is $36 billion today, yet it has over $8 billion in cash and investments.

As EMC talks about achieving objectives and maximizing value over the long term, there is no promise that EMC won’t eventually monetize this VMware stake.  It just seems that now that is no longer a “sooner rather than later” proposition.  That is surprising, at least to me.

JON C. OGG

Its board of directors has approved a 12% increase in the quarterly cash dividend to $0.19 per quarter from $0.17 per quarter.  The board also announced that it has approved a new $3 billion common stock buyback program to replace a $2 billion stock repurchase program which was recently completed with $1.7 billion of repurchase activity.

The dividend will be effective for quarterly dividends payable after March 28.  The new $0.76 per year is an implied dividend yield of about 2.1%.

The company said that since 2003 it has returned $12.6 billion via dividends and buybacks.  It was nearing $20 billion in cash and investments on the latest report.  Shares closed down 3% at $35.56 today, yet shares are up 2% at $36.30 in the after-hours session.

What you were about to get to read was a story titled “How Bad Is QUALCOMM’s Chart Versus Business?” based on its slide.  The real problem is not the units being sold, but the average selling prices of each.  These have been sliding, ergo margin pressure.

Today marked the seventh consecutive losing day for the stock.  Shares were at $46.99 at the close the day the company reported its awful ASP guidance.  That is effectively a pullback of almost 25% in just over a month.  And shares were at $48.76 on the Jan. 7 day that Jim Cramer came out with his crazy tech tsunami piece about 10 tech stocks to win in the mobile internet growth.

The only good news is QUALCOMM’s valuation here.  It trades now at about 16-times 2010 earnings and about 14.4-times 2011 earnings.For whatever it is worth, the 52-week low is $32.64.  Had the company not tried this, and perhaps whatever other tricks it can think of, this stock was on the way to testing those 52-week lows.

Jon C. Ogg

The good news here is that Warren Buffett is less cautious than in the past and is far less pessimistic and depressed compared to how he sounded a year ago.  Buffett claims to have added at least 650,000 shareholders to the 500,000 or so already on Berkshire’s books.  What is going to be different here is that Buffett is appealing to the new shareholders to understand what the company is and what it is not by directing holders to its principles…. Buffett notes, “Berkshire has adhered to these principles for decades and will continue to do so long after I’m gone.”

And there are many more zingers and explanations throughout, along with constant references to Charlie Munger.

As everyone wants to know how they can chase Warren Buffett investing, we have gone way out-of-order and shown his largest public common stocks first.  If you want to know why Buffett is more confident today regardless of tones, take a look at the largest Buffett and Berkshire public common stocks.  There are far better cost basis versus market value comparisons compared to a year ago:

151,610,700 American Express Company (NYSE: AXP) at a 12.7% stake with a $1.287 billion cost basis with a $6.143 billion market value.

200,000,000 The Coca-Cola Company (NYSE: KO) at a 8.6% stake with a cost basis of $1.299 billion and a market value listed as $11.400 billion.

37,711,330 ConocoPhillips (NYSE: COP) for a 2.5% stake with a cost basis of $2.741 billion and an implied market value of $1.926 billion.

28,530,467 Johnson & Johnson (NYSE: JNJ) for a 1.0% stake with a cost basis of $1.724 billion and an implied market value of $1.838 billion.

130,272,500 Kraft Foods Inc. (NYSE: KFT) for an 8.8% stake with a cost basis of $4.33 billion and an implied market value of $3.541 billion.

83,128,411 The Procter & Gamble Company (NYSE: PG) for a 2.9% stake.  We would double-check this but the cost basis is listed as $533 million and given a value of $5.04 billion.

76,633,426 U.S. Bancorp (NYSE: USB) for a 4.0% stake with a cost listed as $2.371 billion and an implied market value of $1.725 billion.

39,037,142 Wal-Mart Stores, Inc. (NYSE: WMT) for a 1% stake with a cost basis of $1.893 billion and a market value of $2.087 billion.

334,235,585 Wells Fargo & Company (NYSE: WFC) is a 6.5% stake with a cost basis of $7.394 billion and an implied market value of $9.021 billion.

Other stocks come to $6.68 billion in adjusted cost basis and had/have a market value of $8.636 billion.  The foreign largest common stock holdings are as follows:

• 225,000,000 shares of BYD Company, Ltd. for a 9.9% stake with a cost of $232 million and a current value of $1.986 billion.
• 3,947,554 POSCO for a 5.2% stake with a cost of $768 million and an implied value of $2.092 billion.
• 25,108,967 Sanofi-Aventis for a 1.9% stake with a cost of $2.027 billion and a market value of $1.979 billion.
• 234,247,373 Tesco plc for a 3.0% stake with a cost of $1.367 billion and a cost of $1.620 billion.

Total Common Stocks Carried at Market are listed as $34.646 billion cost basis and $59.034 billion in market value.  Due to BNSF and other rails being held, that number will look grossly different ahead in the future on both a cost and market value.

In addition, Berkshire Hathaway owns positions in non-traded securities of Dow Chemical (NYSE: DOW), General Electric Co. (NYSE: GE), Goldman Sachs Group (NYSE: GS), Swiss Re and Wrigley with an aggregate cost of $21.1 billion and a carrying value of $26.0 billion.

As far as performance, size does matter. Buffett noted something very specific here which new Berkshire Hathaway holders and potential holders need to consider very closely….. “The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue.” Buffett highlighted that certainty himself.

The acquisition and future operations of the company will remain in simple businesses…. “Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be… At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable. Even then, we will make plenty of mistakes.”

Buffett even talks about investing and lending during the crisis…. “We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback position at Berkshire.” Also noted…. “When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier of liquidity and capital to the system, not a supplicant. At the very peak of the crisis, we poured $15.5 billion into a business world that could otherwise look only to the federal government for help.”

Buffett does not bash the ratings agencies for downgrading Berkshire Hathaway, but he did note… “We pay a steep price to maintain our premier financial strength. The $20 billion-plus of cash equivalent assets that we customarily hold is earning a pittance at present. But we sleep well.”

As far as whether or not Berkshire will make more mergers?  Yes it seems, with a caveat…. “With our acquisition of BNSF, we now have about 257,000 employees and literally hundreds of different operating units. We hope to have many more of each. But we will never allow Berkshire to become some monolith that is overrun with committees, budget presentations and multiple layers of management.”

And to hell with trend and populism here from Warren…. “We make no attempt to woo Wall Street. Investors who buy and sell based upon media or analyst commentary are not for us. Instead we want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur.”

Buffett even backpedaled on the negativity of last year’s (interpreted) message… “Among the 12,830 words in the annual letter was this sentence: “We are certain, for example, that the economy will be in shambles throughout 2009 – and probably well beyond – but that conclusion does not tell us whether the market will rise or fall.” Many news organizations reported – indeed, blared – the first part of the sentence while making no mention whatsoever of its ending.” He even calls it terrible journalism and goes on to say how he and Charlie Munger were not predicting the stock market at all.

GEICO’s growth may slow in 2010…. Buffett also noted that the company sold the small credit card business of a $98 million portfolio of troubled receivables for $0.55 on the dollar.

Buffett explains praise at National Indemnity for Ajit Jain… “If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit.”

The MidAmerican operations, the regulated utility section, gave $1.071 billion to Berkshire, down from $1.704 billion in 2008.  The HomeServices of America unit, the second largest real estate firm in America, is under the MidAmerican unit.  “The BNSF operation has certain important economic characteristics that resemble those of our electric utilities.  It is inconceivable that our country will realize anything close to its full economic potential without its possessing first-class electricity and railroad systems. We will do our part to see that they exist.  In the future, BNSF results will be included in this “regulated utility” section.”

Construction has suffered…. “Every business we own that is connected to residential and commercial construction suffered severely in 2009. Combined pre-tax earnings of Shaw, Johns Manville, Acme Brick, and MiTek were $227 million, an 82.5% decline from $1.295 billion in 2006, when construction activity was booming. These businesses continue to bump along the bottom, though their competitive positions remain undented.”

The major small problem for Berkshire last year was NetJets… “debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, NetJets would have been out of business.” Ouch.

More on Housing… “On the housing front, addressing Clayton Homes, In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.Even under these conditions, I believe Clayton will operate profitably in coming years, though well below its potential.”

On commercial real estate…. At the end of 2009, Berkshire became a 50% owner of Berkadia Commercial Mortgage (formerly known as Capmark).  This is the third-largest servicer of commercial mortgages. “In addition to servicing a $235 billion portfolio, the company is an important originator of mortgages, having 25 offices spread around the country.  Though commercial real estate will face major problems in the next few years, long-term opportunities for Berkadia are significant.”

If you want the classic Buffett on his investing strategies versus cash, it all boils down to this…. Buffett states, “We entered 2008 with $44.3 billion of cash-equivalents, and we have since retained operating earnings of $17 billion. Nevertheless, at year-end 2009, our cash was down to $30.6 billion (with $8 billion earmarked for the BNSF acquisition). We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.”

The other 90 or so pages hold interesting tidbits and one-liners, of which you can see right at the Berkshire site.

JON C. OGG
jonogg@247wallst.com

We have also given odds of Cisco Systems Inc. (NASDAQ: CSCO) starting to pay a regular dividend and even a one-time dividend, as well as handicapping whether Apple Inc. (NASDAQ: AAPL) will pay a one-time dividend.

Gap Inc. (NYSE: GPS) is soaring after earnings today, but it also raised dividend its and announced a stock buyback plan.  The dividend was raised to $0.10 from $0.085 per quarter.  Gap was one of our secondary group stocks we predicted would hike dividends.  We noted, “It may be a safe bet that the company will take the payout to $0.10 per quarter…”

Kimberly-Clark Corporation (NYSE: KMB) was also one of the greatest dividend leaks out there.  As we predicted, and as many others expected as well, the company raised its payout this week.  We had noted earlier in the month, “If the company juices its payout ratio, then that $0.60 dividend may rise to $0.70 or $0.75.”  On Tuesday, the company raised its dividend to $0.66 per quarter from $0.60 previously.  Our take is that the only reason the payout was not even higher was because the company is leaving a cushion for more payout hikes down the road.  With Thomson Reuters estimates of $4.94 EPS in 2010 and $5.35 EPS in 2011, there is plenty of room for future dividend increases.

We are also revisiting some of our recent dividend picks and handicapping which stocks we think will be increasing their dividend payments in 2010.  Here are some odds that dividend hikes are coming in 2010:

First on the list is J.P. Morgan Chase & Co. (NYSE: JPM).  CEO Jamie Dimon has not been committed to bumping up his dividend immediately.  If anyone can tell the market to be patient it is Dimon.  He also said the US is out of the woods for a double-dip recession and the company just this week warned that a new wave of foreclosures is coming.  Still…. J.P.Morgan is one of the top candidates for raising its dividend in 2010.  If any bank can do the ‘return of the dividend’ then it is JPMorgan.  The $0.05 per quarter dividend compares to the old dividend of $0.38 per quarter.  This dividend won’t jump back up near to $0.38.  But taking the dividend to $0.10 per quarter will get Dimon’s common stock back to a whopping 1% yield.  If the FOMC does raise rates, Dimon might not have a choice.  Thomson Reuters expects $3.02 EPS in 2010 and $4.75 EPS in 2011.  If those are hit it could  potentially go back closer to the old dividend, but let’s not get carried away.  It seems there is well above a 50% chance that the dividend is going to at least $0.10 per quarter.

General Electric Co. (NYSE: GE) is next on this list.  The DJIA component and conglomerate cut its dividend last year when it was falling like a troubled bank.  The old $0.31 dividend was cut to $0.10 and the company recently declared its same $0.10 dividend.  GE does offer a competitive yield today at 2.5% and is in-line with competing conglomerates.  There is just one problem, other competitors including 3M Co. (NYSE: MMM) have juiced up their dividends all since the start of 2010.  The pressure is on.  CEO Jeff Immelt and CFO Keith Sherin have both kicked the can down the road further rather than closer on the dividend issue, but this choice is one that the market may start to demand for them.  If GE wants to get its stock closer to $20.00, it may need to reward holders with a dividend of $0.15 or thereabouts.  With Thomson Reuters estimates of $0.99 EPS in 2010 and $1.20 EPS in 2011, it has ample dividend coverage.  A double-dip recession is a huge risk for GE, and that is why we are handicapping this at 60% rather than 90%.

The Dow Chemical Company (NYSE: DOW) is another company we expect to start getting back to some more normalized dividend payouts.  CEO Andrew Liveris took a personal hit after indicating many times in 2008 that the dividend was not going down, yet the recession pinched off its business faster than you could blink.  He had to cut the quarterly payout of $0.42 down to $0.15 per quarter.  Business has started to normalize here but the company is not at peak earnings by any measure.  Earlier this month, Dow Chemical declared its same $0.15 dividend,  The Thomson Reuters estimates for earnings are $1.49 in 2010 and $2.47 for 2011.  The company is not likely to recommit anywhere close to that full former dividend of $0.42 but getting its dividend back to $0.20 or a bit higher in the coming quarters would begin the road to recovery and give it a 2.8% yield.  The reason that the company won’t go back to its old payout rate is because of the risks inherent in a double-dip recession scenario.  Liveris would probably rather jump off the roof than to raise a dividend and then shortly have to go back and explain again why the company needs to save money.  This stock spent much of 2006 to 2008 in the $40’s, well north of its $28.50 area today.  We give better than 50% odds that Dow will boost its dividend this year… Just don’t expect a massive boost.

Cisco Systems, Inc. (NASDAQ: CSCO) is only 3% short of 52-week highs.  CEO John Chambers has shown over and over how he can grow revenues, make acquisitions, invent technology and expand existing technology, and on and on.  Whether the stock is at $20 or at $25 does not matter.  The old tech bubble days share prices north of $60 do not matter.  But what does matter is despite the notion that Cisco has ramped and ramped revenues.  Although it has spent billions upon billions of dollars repurchasing shares of common stock, Cisco has been dead money for long-term investors if you average out the share prices over the last 8 years or so.  The company has close to $40 billion in cash and equivalents and its margins are running north of 64%… He won’t do it, but Chambers could in theory pay out almost $7.00 as a one-time dividend and just start all over on the cash growth.  Thomson Reuters is expecting $1.54 EPS in 2010 and $1.72 EPS in 2011 (July-end), and the company could easily pay out $0.06 per quarter to get to a 1% yield.  If it would refrain from buybacks, it could juice that payment to $0.15 per quarter and get closer to a 2.5% yield.  There is no way to know what Chambers will do.  But 2010 needs to become the year Cisco paid a dividend.  Maybe it will even do a one-time dividend of $1.00 or $2.00 per share plus a continual dividend.  Based upon how entrenched Chambers is in his job and based upon how he has said that is something for a later date, we give under a 50% chance for odds-making of this.  But as far as what Cisco SHOULD do, we give this a 100% bogey.

Just don’t bother telling this notion that investors love dividends to Steve Jobs.  Just yesterday at the Apple Inc. (NASDAQ: AAPL) meeting, Apple’s CEO said that he does not see a dividend payment of any sort at this time.  Jobs is sitting on almost $40 billion in cash and investments and he brings in cash flow galore every quarter.  He could take 75% of that cash and would be able to pay a cash dividend of roughly $33.00 per share…. close to 16.5%, and in perhaps the last year of low taxes on passive income.  Based upon what Steve Jobs said, we’d only give a 20% chance of a one-time dividend payout in 2010.

The iShares Dow Jones Select Dividend Index Fund (NYSE: DVY) is ‘The Dividend ETF’ we use to go after the higher-yielding dividend stocks.  That ETF is meant to track the price and yield of the Dow Jones Select Dividend Index.  By mandate is required to keep about 90% assets in securities of the underlying index and depositary receipts of securities of the underlying index.  Its dividend is sporadic because it clips various coupons throughout each quarter.  That yield is currently just shy of 4% and at $44.17, the 52-week trading range is $25.92 to $45.08 for the ETF.

There are some risks to calling for dividend hikes.  First, a double-dip recession is a big risk.  Many data points to some recovery and at least some normalization of the business climate.  Some are pointing to caution ahead.  Valuations of stocks became stretched in late 2009 and into the start of this year.  We also have no real clue what the new bank and systemic risk regulations will look like and we have no expectation of what healthcare reform and taxes will look like in 2011 and beyond.  Many companies can likely sell the notion to holders that dividend hikes need to be delayed to save and conserve cash for when hard times return.  Still, these are the ones we have picked for higher dividends this year.  We have given odds what the chances of a dividend hike will be.  Stay tuned for any changes to those odds based upon new data in the coming weeks and months.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

What is interesting is that Steve Jobs did say that there is no case yet Apple to issue a dividend. Jobs noted that he’d rather have the cash than to pay out a dividend or to conduct share buybacks. This is going to be a critical because Apple is sitting on a mountain of cash. Our latest count of shares was close to 907 million shares.

With cash and its short-term and long-term investments coming in at $40 billion and with it adding cash flow every quarter, Apple could in theory take 75% of that cash if it wanted to and pay it out this year while dividend taxes for passive income are dirt cheap.

The 75% payout is of course unlikely, but if Jobs did this he would be able to pay a cash dividend of roughly $33.00 per share. That would effectively return 16.5% to holders. Apple would still hold $10 billion in cash and liquidity without factoring in the billion it is bringing in via cash flow.

Apple has been very slow or outright absent when it comes to making real acquisitions. Maybe the company is hoarding cash so it can go buy Nintendo and finally get into the video game console business as well. Doubtful, but possible.

JON C.OGG

We recently addressed many of Berkshire’s key changes in his latest holdings to show which we think Mr. Buffett will keep adding to and which we think he will keep contracting.  Here are some quick takes from that:

• United Health Group (NYSE: UNH) is being steadily cut and we would expect Buffett to say the sector has continued political risks despite the notion that he is a supporter of the Administration’s efforts.
• We already knew of Buffett’s long slow exit in ConocoPhillips (NYSE: COP), but it was interesting to see Buffett cut Exxon Mobil Corp. (NYSE: XOM).  This was shocking considering that Buffett can get all the exposure he wants in oil.  We’d like to hear his take on energy ahead.
• Buffett has continued adding to Well Fargo & Co. (NYSE: WFC) while he has not added to others.  Buffett has said Wells Fargo is his favorite bank and we’d expect to see praise here.
• Moody’s (NYSE: MCO) has been a long and steady declining position, and he has hinted that the  model has changed there.  We expect a full exit of Moody’s as a stock holding in time.
• The most recent move is into garbage with investing buddy Bill Gates into Republic Services Inc. (NYSE: RSG).

Last year, Buffett and Charlie Munger noted, “We’re certain… that the economy will be in shambles throughout 2009… and.. probably well beyond… but that conclusion does not tell us whether the stock market will rise or fall.” There is obviously no way that Buffett will have that tone.  But he is still likely to call America as having its best days ahead…. On that notion, it is up to you if you want to believe him.

What is interesting is that this week Buffett had a roundtable in New York and CNBC has fielded questions from its media watchers all week.  Becky Quick will be doing roughly a three-hour segment on Monday morning with none other than Warren Buffett himself.

This is likely to be a very different shareholder letter than what we saw last year.  Buffett’s full list of his most recent holdings is here.

JON C. OGG

The special shareholder meeting vote was easily in favor with a 76% share vote from 80% of the shares casting votes.  It was required after it repaid $45 billion to get out from under the TARP after the loan was repaid with the bank’s cash on hand and more than $19 billion of new capital via ‘common equivalent securities.’

The conversion of the common equivalent securities is set to take place Wednesday morning.  Bank of America was unable to just sell common stock because of the requirements.  Brian Moynihan, its new CEO, effectively said he did not want the added dilution but it was the best way to run the company going forward.

Shares are down 1.2% at $16.01 late in the trading day and not on any unusual trading volume to note.  Dilution of 10% never felt so good.

JON C. OGG