Tech Dividend Stocks: Cisco (CSCO)
Dividend yield: 3.5%
Cisco (CSCO) stock admittedly hasn’t been very impressive over the last few years based on share price alone. The stock is up just 70% from the March 2009 lows vs. 170% for the S&P 500 index.
But for long-term dividend investors, CSCO could hold serious potential as a value play — especially at current pricing. Cisco yields 3.5% in dividends, which is better than many consumer staples dividend stocks, including Coca-Cola (KO) or Procter & Gamble (PG).
Cisco doesn’t have a long dividend history, but it initiated a dividend in 2011 at 6 cents per share quarterly, and it has already tripled that to 19 cents. Furthermore, even after this steep increase the dividend payout ratio is about 38% of earnings. That’s not just sustainable, but also ripe for future increases in dividends.
Sure, the most recent Cisco earnings did forecast a sales decline — not a good sign for a company that has struggled with its top line previously. But investors have heard this story many times before, so the narrative isn’t new. And don’t forget CSCO actually topped expectations in earnings.
With a forward price-to-earnings ratio of about 10 and a hefty $47 billion in the bank, Cisco seems to be a fair value at current pricing. Long-term investors who want to play the tech sector with solid dividend stocks could do worse than Cisco.