Cisco Systems Offers 3.1% Dividend Yield, Positive One-Year Returns Amid Declining Markets (CSCO)
By: Ned Piplovic,
Despite finally succumbing to downward market pressure and experiencing a minor share price decline, Cisco Systems, Inc. (NASDAQ:CSCO) still managed a positive total return over the trailing 12 months and continues to reward its shareholders with a 3.1% dividend yield.
In addition to this above-average performance, especially compared to its peers in the Networking & Communication Devices industry segment, Cisco Systems has also provided its shareholders seven years of consecutive annual dividend hikes.
The company’s 3.1% dividend yield might seem to be on the lower end of what income-seeking investors desire and is certainly lower than dividend yields of segments like real estate investment trusts (REITs) or master-limited partnerships (MLPs). However, CSCO’s current yield is significantly higher than the average yield of the entire Technology sector and the second highest yield in the Network & Communications Devices industry segment.
The company scheduled its next dividend distribution for January 23, 2019. On that date, the company will distribute the next round of dividend payouts to all shareholders of record prior to the January 3, 2018, ex-dividend date.
Cisco Systems, Inc. (NASDAQ:CSCO)
Founded in 1984 and headquartered in Silicon Valley’s San Jose, California, Cisco Systems, Inc. designs, manufactures and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology industry. With nearly 16,000 employees in the San Jose area, Cisco Systems is the largest private employer in Silicon Valley and the second largest overall behind only the County of Santa Clara administration.
Cisco Systems is also the largest networking company in the world and offers switching, routing and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers. Additional products in the company’s portfolio include private wireline and mobile networks, unified communications products, conferencing products and business messaging products. Cisco Systems also offers internet and e-mail security products, cloud storage technology, service provider video software and technical support services.
The company’s share price started its trailing 12-month period from a 52-week low of $38.30 on December 30, 2017. From that low, the share price embarked on a 10-month uptrend. Despite experiencing three pullbacks, the share price gained nearly 30% before reaching its 52-week high of $49.14 on October 3, 2018. Even after declining in October 2018 on the major pullback of the overall market, the share price recovered by the beginning of December to within 0.8% of its October peak.
However, unable to resist the most recent pressure from the declining markets, CSCO’s share price dropped more than 17% between by the end of the trading session on Christmas Eve. However, by the end of trading on December 26, 2018, the share price gained a little and closed at $42.47. This closing price was nearly 11% higher than the 52-week low from one year earlier and nearly double the price from five years ago.
The company’s current $0.33 payout is nearly 14% higher than the $0.29 distribution amount from the same period last year. This new quarterly amount corresponds to a $1.32 annualized payout and a 3.1% forward dividend yield, which is 5% higher than the company’s own 3.0% dividend yield average over the past five years.
Additionally, CSCO’s 3.1% current yield is nearly 140% higher than the 1.3% average dividend yield of the overall Technology sector. CSCO’s current dividend yield is also almost 134% above the 1.33% simple average yield of all the companies in the Networking & Communications Devices segment.
Even more important than the comparison to the peer averages is the company’s record of dividend growth. Unlike many technology companies that pay minimal or no dividends at all, Cisco Systems has been providing its shareholders with a steadily rising income flow for many years. Since initiating dividend distributions in 2011, the company has enhanced its total annualized dividend distribution amount 450%, which corresponds to an average annual growth rate of 27.6% per year.
While many stocks delivered total losses over the past year because of declining share prices, CSCO managed to deliver to its shareholders a total return of nearly 15% over the past 12 months. The long-term investor enjoyed even higher returns of nearly 70% over the past three years and nearly 120% over the past five years
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