(281)-719-8904 KenFaulkenberry@AAAMP.com

Cisco Dividend Stock Analysis (CSCO)

by

Cisco Dividend

(updated 5/26/2017)

The Cisco dividend has been paid since 2011 and increased for 6 consecutive years. The company is included in the Arbor Dividend Growers / Producers List because of its outstanding potential to be a long term dividend grower.

Price: $31.44
Current Dividend: $1.16

Dividend Yield: 3.7%
Cash Dividend Payout Ratio: 42%

Market Capitalization: $157 B
Enterprise Value: $122 B

Description

Sector: Technology
Industry: Communications Equipment

Cisco is the global leader ($49 Billion in revenue) in designing, manufacturing, selling, and providing service for its routers, switches, access equipment, security and network management software. Their vision is communication among computer networks around the world in a manner that will change the way we work, live, play, and learn.

The future of Cisco will be focused on the Cloud, the Internet of Things (IoT), and Software Defined Networking (SDN). Cisco foresees a world where 50 billion devices will be connected on the internet by 2020.

Their strategy is to provide the leadership, products, and services for the global infrastructure that allows portability of workloads, world-class cloud applications, and deployment of advanced data analytics. SDN will provide on-demand application delivery and mobility that will reduce costs and increase productivity.

SWOT Analysis For Cisco

Strengths

Cisco has a large established clientele that is producing a steady increase of revenue from high margin services. Customer loyalty provides them a built-in advantage to be the provider of new services. The company is one of the top 20 Research & Development (R&D) ($6.2 Billion in 2015) investors in the world. Their broad product line up, R&D, and continual pursuit of the “next big thing” keep Cisco at the forefront of constant change.

Weaknesses

The communications sector is in a mode of continual and aggressive change requiring constant re-investment and innovation. Cisco’s older high margin products are under pricing pressure that is expected to lower margins on those products.

Opportunities

Cisco has a history of making key acquisitions that fill gaps in its products or services. This has included buying many small companies that might have been viable competitors to parts of their business. The company has made it a policy to maintain a pristine balance sheet that allows for this kind of active investing.

Threats

Cloud based solutions will cause the sales of Cisco’s older products to decline. It’s highly likely that gross margins will deteriorate over time.

Dividend Analyzer Checklist

(updated January 2017)

Dividend Safety Score (22/33 points)

Dividend Per Share (ttm):  $0.99
Dividend Payout Ratio (ttm):  47%
Dividend Per Share (10 Year Growth):  n/a
Cash From Operations (CFO) Per Share (ttm): $2.67
CFO Dividend Coverage (CFO / DPS):  2.7   (2/6 points)
Free Cash Flow (FCF) Per Share (ttm):  $2.44
FCF Dividend Coverage (FCF / DPS):  2.5  (4/6 points)
Net Financial Debt:  -36179
Total Assets:  $126287  M
Net Financial Debt / Total Assets:   -29%   (12/12 points)
Net Financial Debt to EBITDA (ttm): 180%
Total Liabilities to Assets Ratio (Qtr.):  50%
Piotroski Score (1-9) (TTM): (4/9 points)

Profitability & Growth Score (25/33 points)

Revenue (10 Year Growth) *CAGR > 4.14%:  5.6%   (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%:  8.9%   (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%:  5.6%   (6/6 points)
Operating Earnings Yield (ttm):   8.0%  (5/7 points)
Net Income (ttm): $10631 M
Gross Profit (ttm):   $31012  M
Total Assets:  $126287 M
Gross Profitability Ratio = GP / Total Assets:  25%  (6/12 points)
Cash Return On Invested Capital (CROIC)(tttm):  14%
Return on Invested Capital (ROIC):  12%
Return on Invested Capital (ROIC) (5 Year Median):  12%
Return on Invested Capital (ROIC) (10 Year Median):  12%

Valuation Score (28/34 points)

Free Cash Flow Yield (ttm):  7.9%  (8/9 points)
EV to EBIT (ttm):   8.8  (8/9 points)
EV to EBITDA (ttm): 7.5  (7/9 points)
PE10:  21.1  (5/7 points)
Price to Sales Ratio (ttm):  3.1
Price to Book Value (ttm):  2.2
Price to Earnings Ratio (P/E) (ttm):  14.1

TOTAL POINTS – (75/100) (50 is an average score)

*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.

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Conclusion

(updated January 2017)

Type of Investor / Recommendation

Large Diversified Dividend Portfolios / Should Be Included
Looking For Exposure to Technology  Sector / Should Be Included
Deep Value Investors / Excellent Choice

Conclusion

(updated January 2017)

Cisco (CSCO) is ranked #9 (out of 246) overall and # 1 (out of 16) in the Technology Sector by the Dividend Analyzer.

The technology sector  is challenging due to the constant disruption of innovation. However, CSCO has a long history of adapting to a changing environment.

 

Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth –  Long
DVB High Income –  None
Arbor Asset Allocation Model Portfolio (AAAMP) –  Long

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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