The upcoming stock analysis is about a technology company, which is in my portfolio for a long time now. The position is not that large butstill I think it is a nice add to everyone’s dividend income portfolio. Cisco System therefore can be seen in a lot of portfolios of the dividend investor community. So let’s have a look if it is worth a buy at its current price.
Company Overview
Cisco Systems (CSCO) is a technology company that designs, manufactures, and sells networking equipment. The company focuses on the following segments which include Enterprise and Service Provider, Small Business and the Home. CSCO was founded in 1984, and is based in San Jose, CA. The dividend growth history is rather short, as it has increased its dividend since 2011 and currently pays a quarterly dividend of 0.29 USD.
Valuation
Currently CSCO is pricedat 31.36 USD per share.
If I take the weighted average of the 4 ratios according to the 5year average the price would be at 28.47 USD. That means the current price is 10.1% above its 5 year average. The 5 year high was at 34.39 USD which was about in May 2017, so currently the stock trades 8.8% below its 5-year high.
The fair market value ratio of the communication equipment sector, according to morningstar is currently at 1.06. If I divide the current price by it I will get a price of 29.58 USD.
Earnings per share growth
In 2011 the EPS were at 1.49 USD and EPS in 2016 were at 2.11 USD. This makes it an average growth per year of 7.21%.This is a quite stable growth even though the growth is not in double digits anymore it just shows that it is a settled company which has already developed its core business. I see that rather positive than negative.
Dividend History and Future
As I already mentioned CSCO does not have such a long history of dividend growth but its increase rate is very impressive. In the last 5 years, the average growth per year is 50.93% based on a dividend of 0.12 USD in 2011 and a current full year one of 0.94 USD. With the current full year dividend the payout ratio is still on reasonable level, when it comes to EPS and Free Cashflow per share.
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