Summary Box: The basics of Cisco’s decision to start paying a dividend

Summary Box: Cisco to start paying a dividend

WHAT’S HAPPENING: Cisco Systems Inc. will pay its first dividend before next July. The annual dividend yield will be in the 1 percent to 2 percent range, it said.

WHY IT’S DOING IT: The maker of computer networking gear has lots of cash. Technology companies usually like to hang on to it and invest in their businesses, but eventually, the successful ones find the corporation has matured and there’s room for a dividend. Paying a dividend can broaden the investor base.

THE COMPLICATION: Most of Cisco’s $40 billion in cash is tucked away overseas, and it will have to pay taxes to repatriate it. Dividend tax rates are also likely to rise with the expiration of a Bush-era tax cut. Cisco is considering these factors in setting its dividend level.