Cisco: A High-Quality Dividend Tech Stock

SSince the start of the year, tech stocks have suffered a massive sell-off, and it doesn’t look like things are looking up anytime soon.

However, you might consider the communications equipment company Cisco (CSCO) if you are looking for a safe investment in today’s market. It’s a stable company with a lot of money coming in every year. The payout is excellent for income investors, making it an attractive stock to invest in.

Cisco has been a great investment for many people as it has offered good returns and has a stable future. The company was able to survive the economic downturns of 2008 and 2009 with very few problems.

A tried and tested performer

Like other tech stocks, Cisco stock has recently taken a beating. However, looking at its profits, revenue jumped 6% in the quarter that ended Jan. 29.

Cisco recently decided to increase the prices of its products. Management believes this will help improve profitability. Cisco network switches, specifically their data center network switches, generated $5.9 billion in revenue. It seems like a successful venture for the company.

The company’s Internet for the Future segment, which offers many profitable products including optical networking, 5G and silicon, saw a 42% increase in revenue last year. However, Cisco’s hybrid work segment with Webex offerings saw revenue decline 9% in the quarter.

According to Cisco, third-quarter adjusted earnings are expected to be between $0.85 and $0.87 per share. Revenues will increase between 3% and 5%. Regarding the outlook for 2022, Cisco expects earnings per share to be between $3.41 and $3.46 and revenue growth to be 5.5% to 6.5%.

The outlook is very healthy and above market estimates. The only problem the company might struggle to deal with is the shortage of semiconductor chips.

Cisco: One of the best dividend-paying tech stocks?

Over the past few years, Cisco has earned a reputation for being an excellent source of revenue. Cisco has changed dramatically over the past decade. Its strategy is significantly different from that of the 1990s. It now views dividends as a productive use of excess cash rather than something less productive.

The company has shown its willingness to share profits with investors, which has increased interest in the company.

The company’s latest dividend is $0.38 paid quarterly, an increase of 3% from the last recorded figure. This percentage increase over the previous figure is an improvement worth celebrating as it shows a commitment to shareholders during a difficult time.

Cisco’s dividend is $1.52 per share and the yield is 2.97%. This is a return above the industry average, which is a good sign.

Besides the dividend, the company has also been aggressive in share buybacks. During the January quarter, Cisco repurchased $6.4 billion in stock, which is great news for investors. Cisco also announced a $15 billion stock buyback authorization, bringing the total authorization to $18 billion.

What does Cisco need to continue growing?

The company is poised to grow recurring revenue from subscription-based software and services, and it’s doing so by moving away from its core product of network switches and routers.

In fiscal year 2021, Cisco reported that subscription revenue represented 44% of total company revenue. However, by 2025, CSCO expects that number to increase to 50% as it continues to grow rapidly.

The increased use of remote work services means businesses might not need to spend as much on their data networks during a pandemic or other disaster. A common opinion is that they will be less important because of this.

Cisco needs to dramatically increase its investment in next-generation enterprise networks. He wants to help enterprise customers build hybrid networks to maximize their efficiency and flexibility.

The Internet cloud includes data centers that look like giant warehouses filled with computer racks, networking equipment, and other equipment. Most of them now use 100 gigabit/second communication systems.

IT departments are struggling to keep up with 400G technology and the upcoming shift of workloads to it. Therefore, Cisco is one of the main companies to benefit from this trend.

The Taking of Wall Street

Conservative in nature, Cisco has remained profitable for decades. The company has also grown its business by acquiring other companies and investing in new technologies.

Wall Street analysts are mildly bullish on Cisco Systems, giving it a consensus Moderate Buy rating. This is based on eight buy, eight take, and one sell rating given over the past three months. Cisco’s average price target is $63.38, implying an upside potential of 23.9%.

The essential

As smarter, faster technologies improve and Cisco introduces new products, data, and applications, the company will continue to grow at a rapid pace. New users are signing up in droves to take advantage of all Cisco offers.

Tech companies have gone through a lot of changes in recent years, which has led them to grow massively. They have also embraced new ways of sustaining sustained growth over long periods of time.

Although the valuation of this company is lower than others, it still provides income for those looking to invest in a potentially rising dividend. Therefore, those looking for income will likely find this business to be a good investment option.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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