Cisco Systems (Nasdaq: CSCO) is Looking More and More Like a Dividend Stock

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Since the height of the dot.com boom, the transformation of Cisco Systems (Nasdaq: CSCO) has been extraordinary.

These days, the Silicon Valley Internet giant looks more and more like a dividend stock rather than an explosive growth company.

In fact, last Wednesday, the San Jose-based behemoth increased its dividend rate by a whopping 75% (from 8 cents per share to 14 cents) starting with the present quarter. That gives shares of Cisco a new dividend yield of roughly 3% which among the highest of major tech stocks.

For investors seeking a reasonably safe return and a less volatile investment, a great deal of value can be found in Cisco these days since the company now plans to return half of its cash flow to investors by way of dividends and stock buybacks.

And while the company may not post eye-popping revenue growth year-after-year, Cisco does appear poised to post healthy results and robust cash flow for years ahead.

That means Cisco's dividend will be both safe and stable.

Cisco Systems: Past, Present, Future

A once high-flying internet company, Cisco went public in February of 1990. The company rode the entire internet wave to the top, and is widely credited with changing the telecom landscape.

In fact, by late March 2000, at the apex of the dot.com boom, Cisco was crowned the most valuable company in the world, sporting a market cap in excess of $600 billion.

Since then its market cap has dwindled to $102 billion. Even still, in June 2009, it was added to the Dow Jones Industrial Average, and also maintains a place in several other influential indexes.

Of course, the future will tell if Cisco's bigger dividend and buyback program are part of a bigger and better Cisco, or simply a small consolation.

In the meantime, the fresh dividend hike is likely to keep shareholders happy, while the share buybacks (which reduce the amount of outstanding shares) will make its outstanding shares more valuable.

The news comes as Cisco reported impressive fourth quarter earnings that beat on all accounts. Cisco posted massive growth global rates in all regions except troubled Europe. Revenue increased 4% and profits jumped 56% compared to the same quarter a year earlier.

Following the earnings report, Cisco CEO, John Chambers noted that an uptick in orders at the end of the just ended quarter is a positive sign for the future. Acknowledging Europe remains a lackluster region, Chambers commented that the U.S. market is showing clear signs of improvement.

"We wouldn't have done the dividend commitment and the cash commitment if we didn't see stabilization in our business and had good confidence going forward," Chamber said on the earnings conference call.

Analysts and investors were quick to take note. Goldman Sachs (NYSE: GS) recently added Cisco to its coveted "conviction buy list," and Piper Jaffrey upgraded Cisco shares.

For income investors, Cisco is suddenly a stock worth considering.

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