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Cisco Systems (Nasdaq: CSCO)

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

By , Contributing Writer, Money Morning -

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.

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The Biggest Threats Cisco Systems (Nasdaq: CSCO) Needs to Overcome

By , Contributing Writer, Money Morning -

There was nothing to scoff at in Cisco Systems Inc.'s (Nasdaq: CSCO) third quarter earnings - but the company's disappointing outlook put Wall Street on alert.

Cisco, the world's leading maker of networking devices that support Internet traffic, reported healthy fiscal third-quarter numbers after the close yesterday (Wednesday). Cisco posted a profit of $2.2 billion, or 40 cents a share for the quarter that ended April 28, up from $1.8 billion or 33 cents a share in the same period a year earlier.

Per-share earnings rose from 42 cents to 48 cents, and revenue jumped 6.6% to $11.59 billion. The company's product segment, its biggest top-line contributor, enjoyed a 5% increase, while its service segment's revenue swelled by 13%.

But the company's outlook fell short of expectations, sending shares sliding lower by more than 8% in after-hours trading to $17.18. And that decline could continue if Cisco doesn't address some key areas of concern.

"While Cisco seems to be making considerable headway on improving gross margins, we expect a number of uncertainties could continue to weigh on the stock," Scott Thompson of FBR Capital told Barron's. Thompson cut his CSCO price target to $20 from $22.50.

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