Cisco Systems (CSCO) raises dividend by 12% and offer solid value.

Cisco’s (NYSE:CSCO) dividend was increased by a sold 12%.  Its overall yield is 3.45%. The firm started paying a dividend in 2011.

Cisco Systems manufactures and sells networking information technology industry worldwide. It provides switching products and storage products. The company offers set-top boxes, cable modems and video software. It provides conferencing products, data center products, and security products The company was founded in 1984 and is headquartered in San Jose, California.

Cisco has maintained an impressive three-year growth rate of dividends of 13.5 percent. Cisco currently ranks 1st in dividend yield within the large cap technology, networking and communication devices category. The quarterly dividend for the April payment will be $0.29 versus the prior year rate of $0.26 per share. Cisco is a member  of our Top 100 Dividend Stocks.  (see below).

top-100

The dividend will be paid at the new higher rate on April 26, 2017, to shareholders of record at close of business on April 6, 2017. Cisco Systems Inc. is currently priced at $33.60. Listed in the table below are the quarterly dividend payments since 2011.

Date Quarterly Dividend
4/6/2017 0.29
1/4/2017 0.26
10/3/2016 0.26
7/5/2016 0.26
4/4/2016 0.26
1/4/2016 0.21
10/1/2015 0.21
7/1/2015 0.21
3/31/2015 0.21
1/2/2015 0.19
9/30/2014 0.19
7/2/2014 0.19
4/1/2014 0.19
1/2/2014 0.17
10/1/2013 0.17
7/1/2013 0.17
4/4/2013 0.17
11/27/2012 0.14
10/2/2012 0.14
7/2/2012 0.08
4/3/2012 0.08
1/3/2012 0.06
10/4/2011 0.06
7/5/2011 0.06
3/29/2011 0.06

Analysis of Cisco is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 3.45%  101
Dividend Growth (3-6 year avg) 32.7%  40
Forward P/E 13.48  77
S&P Financial Rating  AA-  80
Beta  1.10  150
Total Score  448

Additional Information;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr low Yield % 5 yr max Yield %
3.45% 13.5% 51.9% 9.65 3.48 2.30 4.70 1.25% 3.71%

Final Analysis;

Positives;

  • Cisco’s dividend yield is above that of the S&P 500 Index.
  • Cisco’s current dividend yield (3.45%) is above its five-year average historical dividend yield.
  • Cisco has paid out a dividend consecutively for the past 6 years.
  • Cisco maintains an investment grade rating of AA-.
  • Cisco has maintained a three-year growth rate of dividends of 13.5 percent.
  • Cisco is trading below its ten-year average price/sales (P/S) ratio.

Negatives;

  • Cisco maintains a beta of 1.10, higher than the average company.

Latest Earnings & Overall Analysis:

Cisco issued its earnings data on February 15th. Cisco issued first-quarter earnings at $2.3 billion, or 46 cents a share. This versus $2.4 billion a year earlier. Revenue was $12.4 billion versus $12.3 billion. For the second quarter, the tech giant anticipates earnings per share of 56 cents and revenue to fall 3% year-on-year.

2016 2015 2014 2013 2012
Earnings per Share  2.36  2.21  2.06  2.02  1.85
Annual Dividend  0.94  0.80  0.72  0.62  0.28
Payout Ratio  39.83%  36.20%  34.95%  30.69%  15.14%

Continuous weakness in switching and routing was the culprit for the poor results. But the firm maintained growth in wireless and security.  Deferred revenue growth was up a solid 12.5% versus a year ago. Software growth was also brisk up over 50%.   The acquisition of AppDynamics last year will contribute to its continued growth in software.  Cisco is slowly moving into the cloud, software and customer analytics. This revenue is growing fast and will slowly offset their legacy business over the next five years.

This faster growing revenue pie makes up only a third of business. Legacy routers and switches account for early thirds of Cisco’s total revenue.  But the firm does maintain a large lead over competitors in this legacy business. Especially its ethernet switches and routers. These are number one in the arena. Since its a top producer of switches and routers, the payment it receives is at a premium over competitors. Nokia and HP are the primary competition in this market, but Cisco continues each quarter to remain in the lead and actually gain share.

Overall, the firm is a leader in its field, pays a high 3.45% yield, and has a great balance sheet. Cisco has maintained a three-year growth rate of dividends of 13.5 percent. Although the heady growth days of the early internet days are over, it still provides solid growth in earnings and dividends at a consistent rate.

Earnings per Share 2017 (projected)  2.40
Dividend  1.08
Payout Ratio  45%

Based on the firm’s high dividend yield, consistent dividend growth history, and investment grade rating, Cisco Systems, Inc. qualifies as one of our Top 100 Dividend Stocks

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Cisco Systems, Inc. Dividend Yield Historical Chart (Click to enlarge)

csco3

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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