Is Cisco Systems Inc (NASDAQ:CSCO) A Good Dividend Stock?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 7 years, Cisco Systems Inc (NASDAQ:CSCO) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Cisco Systems should have a place in your portfolio. See our latest analysis for Cisco Systems
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Cisco Systems fit our criteria?
The current trailing twelve-month payout ratio for the stock is 58.28%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 49.85%, leading to a dividend yield of 3.29%. However, EPS should increase to $2.07, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Cisco Systems as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Cisco Systems generates a yield of 2.93%, which is on the low-side for Communications stocks.
Next Steps:
If you are building an income portfolio, then Cisco Systems is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant aspects you should further examine:
1. Future Outlook: What are well-informed industry analysts predicting for CSCO’s future growth? Take a look at our free research report of analyst consensus for CSCO’s outlook.
2. Valuation: What is CSCO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CSCO is currently mispriced by the market.
3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
