High Dividend Stocks — Cisco (CSCO)
Market Cap: $114.5 billion
Dividend Yield: 3.4%
Cisco (CSCO) has had plenty of detractors over the last few years. The stock is up just 70% from the March 2009 lows vs. 170% for the S&P 500 index. And longer term, over the last 10 years is actually slightly in the red vs. 60% or so for the S&P.
But for long-term investors in dividend stocks, Cisco could hold serious potential as a value play — especially at current pricing.
Cisco doesn’t have a long dividend history, but it initiated a dividend in 2011 at 6 cents per share each quarter and has already tripled that to 19 cents after its most recent dividend increase. Furthermore, even after this steep increase, the dividend payout ratio is only about 38% of earnings. That’s easily sustainable, and even ripe for future increases in dividends.
Sure, the most recent Cisco earnings did forecast a sales decline — not a good sign for dividend stocks that have struggled with their top line previously. But investors have heard this story many times before, so the narrative isn’t new. And don’t forget Cisco 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 and get a good dividend could do worse than look Cisco’s way.