Thursday, February 13, 2014

Trade - Buy

I open a new position with Cisco System Inc. (CSCO)

29 shares @ 21.84 on 2-13-2014

This will increase my forward 12-month dividend by 22.04 to a total of $1,210.80

I updated my Portfolio to reflect the change.


As you can see Cisco for the most part of this 15 year graph has been overvalue. Just recently it started to trade under the orange line. Cisco has a Debt/Cap of 16% which is great. It also has a dividend payout ratio of 46% which is great as well.




Here is a 4 year graph and it shows how undervalue Cisco is right now.



Here we have a chart that shows future estimate earnings.



One of my concern is that Cisco just recently started paying out dividends in 2011. As you can see Cisco has been raising its dividends. Cisco just raised its dividends from .17 a share to .19 a share. This is a increase of 11.7%. Since they have a low payout ratio, I see more dividend increases in the future.



Here we have a chart showing the last 5 year of price and dividends. As you see the dividends keeps on rising. This chart does not account the new 11.7% raise that came out today. This tells me that Cisco is undervalue.





Morningstar (4 star out of 5) Fair value of $26.00
S&P Capital IQ (3 star out of 5) Fair Value of $28.20


What do you think of Cisco? Do you own shares or plan to?


14 comments:

  1. I have been (sort of) keeping tabs on CSCO since before it even paid dividends. Not a textbook sleep well at night stock, but I think you will enjoy dividend increases at an advantageous rate for the foreseeable future. Have fun with the rising dividends at an undervalued price! Pretty nice little pick up, but be sure to monitor this holding!

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    1. Thanks CI, I monitor all my positions. Thanks for the warning.

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  2. Don't forget that CSCO has over $9/share in cash on the balance sheet.

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  3. I think CSCO is a good buy right now. I was looking at it myself, and expecting the dividend to be raised. I passed in the end again because too small yield for me right now. They have a ton of cash though I heard a while back and expect the growth to continuein the dividend.

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    1. Thanks. yes they do have a lot of cash.

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  4. Hi FF,

    good purchase!
    I think Cisco is traded approximately at the fair value at the moment.
    And in the future Cisco is needed very well.
    For example the connection from car to car or car to traffic light.
    I think Cisco will grow strong in the next 10-40 years!

    Best regards
    D-S

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    1. I too believe in "Internet of everything"

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  5. Hello FF
    Nice purchase, good luck with Cisco!
    DH

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  6. I love Cisco. Tech companies have made me nervous lately. I was worried that it my follow Intel's footsteps and not raise its dividend. I am sure glad that it came out with a raise.

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    1. I too love Cisco. I am CCNA and CCNP certified. I work with Cisco product all the time.

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  7. I am mixed on this one, and since I shy away from tech generally it is not for me. On the plus side it is extremely cheap. They are sitting with $30+ billion net cash on the balance sheet and generating tons of free cash flow, so in many ways a compelling value.

    Nonetheless…..it is no longer the growth company it used to be, and their last earnings report was not good. I think the just may be a bit big and not nimble enough to turn things around for a long time (that being said I own the dinosaur of all tech stocks in Microsoft!). Cisco is basically in the server business, but cloud is the future.

    However, with that cash and low payout ratio, you are almost certainly going to enjoy rising dividends for at least the next little while, and if they can turn things around you will have a winner on your hands. Good luck.

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    1. I agree. They have the cash to continue raising dividends and I believe wit the "internet of everything" they will turn it around.

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