Telecommunications giant Cisco Systems (CSCO) is an interesting stock to look at for investors. Especially those seeking a reasonable dividend while lowering volatility and seeking capital preservation in their portfolio.
Cisco — headquartered in San Jose, Calif. — is the world’s largest communications equipment manufacturer, with a market capitalization of $195 billion.
A stable and mature business has allowed Cisco to pay out solid dividends. The current quarterly dividend is 38 cents a share. That equates to an annualized yield of 3.2% — more than double the 1.5% yield of the S&P 500.
While not confirmed, it is likely that Cisco will once again announce a dividend hike when the company reports December-quarter earnings after Wednesday’s market close. If it does, it would mark 12 consecutive years of dividend increases by the company.
Cisco To Report Second Quarter Earnings
Speaking of second-quarter earnings, EPS is estimated at 85 cents on revenue of $13.419 billion, according to FactSet. After reporting EPS of $3.36 last year, Cisco is expecting modest growth. Full year 2022 earnings are estimated to increase to $3.55, and to grow to $3.83 this year.
For investors foremost seeking capital preservation, Cisco is a stock to consider. The company has an impressive AA- debt rating by S&P and is holding onto more than $20 billion in cash on its balance sheet.
Some analysts have suggested that a big acquisition could be in the cards, especially as the company slows the pace of share buybacks.
In the event that Cisco does not find a candidate for an acquisition, it could once again shift to returning more cash to shareholders through dividend increases and buybacks. However, this would likely come at a cost of long-term growth.
Cisco stock is forming a flat base with a 50.81 buy point. Despite the market rallying dramatically since the start of 2023, shares of Cisco have lagged. It currently remains below resistance at the 50-day moving average.
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