5/4/2015  11:18 AM  E.T.

Cisco Systems, symbol CSCO seems like dead money.  Many of us have held that stock for quite a while.  The dividend of 2.8% does pay you to wait; and perhaps the succession plan announced today is encouraging, yet  I need more.   Therefore, I will sell a call today on the remaining shares I own. 




Strike price:

I selected a strike price of $32.  That strike price gives me a nearly 40% gain on my basis and a 9.4% gain on shares if I bought today.    CSCO has had trouble getting out of the 20's and if it does, it may soar and I could lose that upside potential.  However, I am willing to lose a 2.8% dividend.  I could buy Telephone, symbol, T and boost my income to over 5%.

Expiration Date:

I picked an August expiration because the call premium of $.45 is well above the one percent I demand from a call.   Moreover, the expiration date is out far enough that I will also get the $.21 dividend expected about 6/30 or 7/1 2015.   On a personal level I will try for a $.50 premium and if I cannot get it by mid afternoon, I will lower the limit to $.45.  

Covered Call Table:

The table below presents the covered call analysis.




TheMoneyMadam

Disclosure:  Long CSCO with calls

Related articles

• Cisco Systems May Be on the Verge of Moving Higher
• CSCO Stock to Soar - 5 Reasons to Buy Cisco Systems, Inc. Now
• Cisco: UBS Likes Their Fiber Optic and Packet Future
• Cisco Systems, Inc. (CSCO) Vs. Google Inc (GOOGL): Cramer Implies Pouring Money Into Europe Placates Antitrust Regulators

Read more »

CSCO a hold.

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.

Increasing Income:

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. 

Solid Fundamentals:

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.

Covered Calls:

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.

TheMoneyMadam

Disclosure:  Long CSCO with calls

Read more »