Summary
- Cisco's free cash flow has been highly stable and growing steadily, allowing it to raise its dividend at a rapid rate since it began paying one in 2011.
- Cisco is the world leader in mission-critical IT hardware with about 50% of sales coming from switches and routers.
- Cisco has gone from an overvalued watch list stock to a reasonably priced 3.2%-yielding blue chip thanks to its most recent bear market.
- This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »
Today I decided to step outside of my REIT wheelhouse and focus on an impressive blue chip C-Corp. However, keep in mind that this research is also helpful for me as a REIT analyst, as I cover technology sectors such as data centers and cell towers. Year to date these two sectors have returned an average of 35%. (We like Digital Realty (DLR) and CyrusOne (CONE) today.)
Assisting me with this article is Dividend Sensei, who is ranked as a top analyst. Recently a member asked us to do a deep dive on Cisco Systems (CSCO) and now I know why.
While stocks are the best performing asset class in history, few companies have been able to deliver such impressive wealth compounding as Cisco has over the past 28 years.
Cisco Total Return Since 1991
(Source: Portfolio Visualizer) portfolio 1 = CSCO
$10,000 invested in Cisco in 1991 would be worth almost $4 million today, and that's even factoring the absolutely crazy bubble valuations of the tech bubble, which saw Cisco plunge 86% from its peak.
However, today Cisco's days of hyper growth are behind it and investors are primarily interested in it as a source of generous, safe and rapidly growing dividends.
Total Returns Since Cisco Began Paying A Dividend In 2011
(Source: Portfolio Visualizer) portfolio 1 = CSCO
The modern dividend-paying Cisco has managed to match the red hot S&P 500 over the past eight years.
So let's take a look at the three reasons conservative income growth investors might want to own Cisco, including its reasonable valuation that potentially could allow it to continue delivering double-digit annual total returns over the next five years.
More important, find out at what price you could opportunistically buy Cisco in 2020 in order to enjoy not just a very safe and rapidly growing 4+% yield, but also 15+% CAGR long-term returns.
...Originally Posted On Seeking Alpha
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