Cisco systems, symbol CSCO is in so many technology portfolios including mine. Those of us who are long are eternal optimists. It is a quality company however, the stock is not quite a Dividend Machine and one could think of it as dead money. I have several reasons to hold this stock and they are outlined below.
Paid to wait:
CSCO has paid dividends for the past four years. Their most recent dividend was $.21 in March of 2015 for a forward yield of 3.032%. I have been waiting a long time for CSCO to perform and there is no question that I have a gain of over 20% but I sure would like a lot more. Since technology is gradually inching the way back from the debacle of the dot com bust in 2001, I can hold onto CSCO because of the dividend.
Once CSCO decided to pay dividends, it has increased the payout with gusto. They paid their first dividend four years ago at the rate of $.06 per share per quarter. Their most recent dividend was $.21 and that is an average annual increase of 6.25% per year. This is very a respectable dividend growth history.
CSCO is not a Dividend Machine because I require at least a 3.5% dividend yield and a five year average dividend growth rate of 4% or more for a stock to qualify as a 2015 Dividend Machine. CSCO’s current yield is only just above 3% and their dividend history spans only four years.
Yet as you can see by the data presented in the table below, CSCO is a solid stock. Earnings per share are $1.66 and D/E ratio is .34.
CSCO has not had great covered calls over recent years but today I was able to sell a July $30 for $.35. My cost basis is $23 but even if you bought CSCO today, the call makes sense. See the table below.
I am holding CSCO for a while longer and these four reasons are why.
Disclosure: Long CSCO with calls