CSCO Dividend Analysis

This U.S. company is more valuable than the entire Russian stock market.

Internet “plumbing” company Cisco is more valuable than every company… employing every private sector worker… in the entire Russian stock exchange.

These are the type of companies we look to invest in over the course of a lifetime… The strongest, safest businesses in the world. Their utter dominance—larger than entire countries’ stock markets—means unceasing cash flow and relentless dividend growth.

That’s why great businesses who pay consistent dividends are the safest, surest way to make a substantial fortune in the stock market.

Cisco Systems Business

Cisco was founded in 1984 and began issuing a dividend in 2011. Since then Cisco has increased its dividend every year.

Cisco designs and sells broad lines of products, provides services and delivers integrated solutions to develop and connect networks around the world, building the Internet. Over the last 30 years, they have been the world’s leader in connecting people, companies and technologies – to each other and to the Internet. This is why we have deemed Cisco the “Internet Plumber” of the world.

Competitive Advantage

It is important to understand Cisco is the leader and premiere provider of networking solutions around the world. The internet has transformed our country and will continue to transform the world as more countries begin to come online. Internet connectivity in a household use to be a luxury but over the last decade it has become a staple. Just like every home has running water, soon every home will have internet.

And Cisco is the best suited to provide the networking requirements for homes and businesses around the world!

Growth

Cisco continues to establish a strong presence in the rapidly growing and hyper competitive cybersecurity industry. In a time where hackers continue to have their way with governments, businesses, and individuals it is imperative we better protect private information. Data breaches have cost these entities hundreds of billions of dollars a year. One hacking case actually led to a large filming corporation agreeing not to release a particular film.

Cisco is working to provide solutions. Cisco has recently announced plans to buy two cyber security companies. These will add to its already-growing presence in the industry. Cybersecurity represents just over 3% of Cisco’s annual revenue today… But it’s likely to grow into a bigger piece of the business going forward.


Next, demand for Cisco’s products will grow along with the unstoppable tech trend called the “Internet of Things” (IoT). As wireless technologies get better and cheaper, people are finding more and more uses for them in their everyday lives.

For example, you can now program your thermostat from your smartphone. Your wristband can chart your fitness levels on your tablet. You can order paper towels with the press of a button… or groceries with the wave of a wand.

For lots of businesses, implementing IoT technologies is a must due to their significant insights. The data these technologies provide help cut costs and improve services… And if companies don’t invest in IoT now, they risk becoming obsolete. And Cisco Systems provides some of the essential pieces of equipment that companies need to build out these technologies.

Is This A Great Business To Own?

Sales

Sales, also known or considered as revenue are the life blood of a company. In order to do anything else you have to bring money through the doors. One of the first things we look at when evaluating a company are its sales, but more specifically its sales growth.

CSCO - Cisco Sales

We want to know right away if this company is making more money, stabilizing, or declining. Sales are a great way to determine this quickly.

Long Term Debt

Just like you and I would have debt, companies also have debt. Long term debt for a company is debt with an obligation longer than 1 year.

Debt necessarily isn’t a bad thing, after all companies finance things just like the rest of us. However, we don’t like to see an explosion of long term debt without any significant reasoning from the company.

CSCO - Cisco Debt

You can see from this graph Cisco Systems has stabilized its long term debt on the balance sheet. Also keep in mind interest rates have been at historic lows during this time period so it makes complete sense for a company to borrow money at low rates. However, we want to ensure they are borrowing money in order to increase the productivity of their business.

Free Cash Flow

The number one thing we look for in a company is the amount the amount of free cash flow it generates. We want to see huge mountains of cash, literally! Free cash flow is the amount of money left over after a company pays its bills and makes the necessary investments in infrastructure and equipment. It’s essentially the money left over for owners and it’s nearly impossible to fake using standard accounting practices, another reason why we love this metric.

CSCO - Cisco FCF

This graph is not a smooth trend upwards but the trend is clear, free cash flow has increased significantly for this business.

Outstanding Shares

You must remember a stock is a “piece” of a business. That piece of business is called a share, it’s what you purchase and a company only has a finite number of shares. These shares are known as “outstanding shares.”

Think of a company as a pizza, the more slices it has the less pizza the owners have per slice. This is why we like to see the number of outstanding shares decreasing over time or at the very least stabilizing.

CSCO - Cisco Shares

Looking at this photo it is abundantly clear Cisco Systems has its shareholder’s best interest at heart. They have steadily decreased the number of outstanding shares over the last 15 years. This has led to shareholders obtaining a larger portion of the company over time.

Dividends

Companies who pay dividends typically pay them out every quarter, the company counts its earnings and pays out some portion to its owners (the shareholders). Essentially, your dividend check is your share of the profits. We look for companies that pay steady rising dividends on a consistent basis.

CSCO - Cisco Dividends

While Cisco is relatively “new” to issuing dividends to their shareholders, we fully expect this to continue going forward. Their massive cash flow more than covers the dividends they issue to shareholders. Remember, the two best things for shareholders are great businesses that pay a dividend and buyback shares of their company on a consistent basis. We call this concept “Shareholder Appreciation.”

Will my grandchildren use this product?

And last but not least, we ask ourselves one final question. Will our grandchildren use this product? While Cisco Systems has only been in business for 30 years it is quite clear that have established a dominant moat in the industry of technology. As our country and the entire world moves forward to a more connected environment Cisco will be there to take care of their networking needs.

Cisco Dividend Schedule

Cisco Systems typically pays out their dividend in the following months:

  • January
  • April
  • July
  • October

For full details on their dividend schedule you can go directly to their website under investor relations.

Leave A Response

* Denotes Required Field