What is the future of Cisco Systems
Nut Depot: Why Cisco Systems Stock?
A little technology for your portfolio can't hurt.The savings croissant
So far, I've tended to invest in dividend stocks and very conservative industries. Technology stocks are virtually absent from this. These stocks thrive on rapid growth and price gains. But of course today's growth stocks are tomorrow's dividend stocks.
At Cisco Systems I made my first major investment in a technology company. It's a shame that I didn't have the company on my watchlist in March.
About the company:
Cisco Systems was founded in the 1980s. The company specializes in network hardware and software. In addition, not only are products offered, but 25% of sales are also earned with services such as maintenance contracts.
- Sales approx. USD 51.9 billion (2019)
- Profit approx. $ 11.5 billion (2019)
- Dividend $ 1.36 (2019)
An important key figure is still missing here. The market value is around USD 175 billion. That is almost three times the market value of VW. If you look at the key figures, VW comes up with 5 times higher sales. The dividend was even 9 times as high, but in terms of profit, both companies performed similarly in absolute numbers in 2019 (VW was only about 10% higher). That means Cisco's business model appears to be more profitable.
The positive aspects:
The company has increased its dividend by nearly 10% annually over the past few years and used its profits to buy back shares. This enables you to act in the future, to make acquisitions or to grow organically and shows that you are pursuing a solid financial policy. Here you can take a look at the dividend development since 2011.
Positioning for the future:
The Corona crisis has made it clear in many companies what is not yet running smoothly in IT. Often systems did not run from the home office, or not all of the work that one wanted to do could be carried out. This will give digitization a big boost. The webex portal for online meetings operated by Cisco will also see an enormous increase in customers and has certainly positioned itself well for the future.
In addition, the digitalization push is driving the Internet of Things. This means networked factories and manufacturing processes. To make progress in these areas, you need network technology and companies who are familiar with the maintenance of such networks. So here, too, I see greater market opportunities for Cisco.
At an initial price of € 38.90, this results in a dividend yield of 3.2%. That is certainly a low basis at first, but if the dividend policy remains with increases of approx. 10% p.a., I will already be at a 5.1% return in 5 years. It should be noted that Cisco only invested 19% of its profits in paying the dividend in 2019. 67% went into buying back shares. First of all, I'm satisfied with the prospect and I'm excited to see what will happen to the company in the future.
This post \ "Nut Depot: Why Cisco Systems Stock? \" Reflects my opinions and experiences on the topics presented. It does not contain any investment or investment recommendation.
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