Cisco Systems Rewards Shareholders with 6% Quarterly Dividend Boost (CSCO)
By: Ned Piplovic,
In addition to a strong share price growth since the beginning of 2019, Cisco Systems, Inc. (NASDAQ:CSCO) continues rewarding its shareholders with rising dividend income by boosting its quarterly dividend payout 6.1% for the upcoming round of dividend distributions.
Furthermore, the company has increased its quarterly dividend payout at least once every year since beginning dividend distributions in 2011. While Cisco’s current dividend is below the 3% yield mark generally coveted by income investors as a minimum requirement, the company continues growing its quarterly dividend payouts every year and complements its rising dividend income with a steady asset appreciation for strong total returns on shareholders’ investment.
Cisco Systems also managed to improve its dividend payout ratio over the past few years and brought the ratio below the upper limit of the 30% to 50% range that investors generally consider sustainable. Currently at 48%, Cisco’s current payout ratio indicates that the company is distributing less than half of its earnings as dividend payouts to its shareholders. Therefore, the company retains enough funds to support other business activities, such as expansion and daily operations. This current payout ratio is a significant improvement compared to the 121% average payout ratio over the past five years.
Investors seeking equities with balanced returns from growing income distributions and steady capital gains, should conduct their own due diligence to confirm the compatibility of the Cisco stock with their investment strategy. After confirming the compatibility, interested investors should move quickly to claim share ownership before the upcoming ex-dividend date on April 4, 2019. All shareholders of record prior to that ex-dividend date will receive the next round of increased quarterly dividend distributions on the April 24, pay 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.
Cisco Systems boosted its quarterly dividend payout amount 6.1% for its next round of distributions from $0.33 in the previous period to the current $0.35 distribution. This new quarterly dividend amount converts to a $1.40 annualized payout and a 2.6% forward dividend yield. While Cisco continued to boost its dividend payouts, the company’s share price advanced at a faster rate over the past year. Therefore, the company’s yield declined and is currently 5.6% below company’s own 2.8% average yield over the past five years.
However, while lower than the company’s own five-year average, Cisco’s current yield is almost 180% higher than the 0.94% average yield of the entire Technology sector. Furthermore, Cisco’s current yield also outperformed by nearly 380% the 0.54% simple average yield of the company’s peers in the Networking & Communication Devices industry segment. As the second highest yield in that segment, Cisco’s yield is even 21% higher than the 2.17% average yield of the segment’s only dividend-paying equities.
While Cisco’s current yield outperformed industry peers by a significant margin, most technology stocks generally pay very low dividends, if any. Therefore, a better indicator of Cisco’s income distribution strength is the history of dividend growth. Since distributing its first dividend payout in the second quarter of 2011, Cisco enhanced its total annual dividend amount nearly six-fold. This level of growth over the past eight years corresponds to an average annual growth rate of nearly 25% per year. While the growth rates tend to diminish naturally as the amount rises, Cisco still managed to maintain an average annual growth rate of nearly 17% over the past three years.
Unlike many other equities in the market that are still seeking to recover from the December share price pullback or age just breaking even, Cisco has rewarded its shareholders with a 28.4% total return on investment over the past 12 months. Furthermore, Cisco’s shareholders doubled their investment over the past three years with total returns of 104% and earned a total return of 162% over the last five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.