The market has been making a comeback in recent weeks, and tech stalwart Cisco Systems, Inc. (CSCO) is no exception. Since the beginning of February, shares of CSCO stock have gained almost 20%, dramatically outperforming the Nasdaq Composite‘s 3% climb.
That run only leaves Cisco stock flat over the last year, though, showing just how tough things have been for the networking giant. But I still believe CSCO stock is a very strong stock investment after this red-hot run, for a few key reasons.
From a big picture perspective, Cisco plays an important role in three tech mega-trends: Big Data, cloud computing and the Internet of Things. To that end, Cisco has seen strong growth over the last five years in its data center products, which underscore such trends. Plus, Cisco made several strategic acquisitions related to security, mobility and the cloud in recent years.
All of these moves position Cisco stock for substantial growth.
In addition to having a hand in cutting-edge areas, Cisco remains the most dominant player in networking equipment with its suite of switching and routing products, collaboration products, video gear, Wi-Fi solutions and more. That offers stability from a business perspective.
RBC Capital Markets agrees; the firm just put out an “outperform” rating for Cisco stock, citing high demand for the sector (and for networking in particular) and adding:
“Cisco remains a serial acquirer for equipment-related companies and is well positioned to continue diversifying its revenue streams into Internet of Things (IOT), Software Defined Networking (SDN) and Network Function Virtualization (NFV).”
Why CSCO Stock Has the Edge
But there’s even better news.
Cisco is a poster child for stability from an investment perspective too. The company has been controlling costs, upping its dividend dramatically, buying back shares and building up its balance sheet over last several years. When markets are volatile, rock-solid fundamentals — as are on display with Cisco stock — are particularly crucial.
In fact, Cisco jumped most recently after a solid earnings report that came with yet another dividend hike. The company posted better-than-expected results on the top and bottom lines, gave guidance that was better than Wall Street hoped for sales and in-line for earnings and increased its dividend payout by a sweet 24%. The quarterly payout is now 26 cents per share, which translates to a yield of 3.7%, even after the recent run-up.
Add it up.
Given its size, financial strength and continued investments in new technologies, I expect Cisco will remain a dominant force in the networking industry, even with any increased competition. As a result, I expect investors to continue being hungry for shares, especially when you consider that stability is so hard to find in today’s market.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
