Cisco Systems (CSCO) Offers Investors a Double Digit Increase
There is not a day that goes by, where our dividend income stream is not growing. For the past 9 years, we have been growing our income by investing in dividend stocks.
Other days … our dividend income machine is growing through reinvestment. We take 100% of our dividend income and turn it into more shares of stock … that will in turn earn us more income. It is a great cycle to repeat!
Then … there are times when we grow our future dividend income without doing anything. Instead of investing new money or reinvesting dividends … we rely on the companies we own to pay us more income.
Because we invest in well managed corporations that pay back their shareholders … we are often rewarded with a raise.
Almost every company that we invest in gives us a raise each and every year through dividend increases. We use these increases (along with new investments and reinvestment’s) to grow our future income.
The most recent dividend increase from a stock we own was from Cisco Systems (CSCO).
CSCO Shareholders Get a 11.5% Raise
Cisco Systems (CSCO) recently announced an annual dividend increase. The company has been consistently raising dividends for the past 6+ years.
While they don’t have the long track record of annual increases like some companies, we believe Cisco Systems is well on their way to becoming a top dividend growth stock.
Company shareholders will now receive $0.29 in quarterly dividends for each share they own … instead of $0.26 paid previously. This increase meets our desired dividend growth rate of well over 6%.
The latest increase bumps the annual dividend for CSCO up to $1.16 per share compared to $1.04 just last quarter.
Overall, that is a 11.5% increase in dividend income!
How Much Extra Income?
We currently only own 10 shares of CSCO in our Money Sprout Index.
Over the past couple of months, whenever we get extra cash to invest … this is one of the stocks that we have been buying. We plan to continue building up our position in the company in order to grow our future dividend income.
This latest dividend increase has pushed our 12 month forward dividend income for CSCO up to $11.60, compared to $10.40 last quarter.
That is an annual dividend income increase of $1.20
Whether they are large or small, all of these increases can really add up over the months and years.
With this latest increase by Cisco Systems, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,302.42.
Dividend Growth for CSCO
We have owned shares of Cisco Systems (CSCO) for about 2.5 months now. That isn’t much time compared to other stocks we own … like Consolidated Edison (ED) at almost 9 years.
Despite our little time owning the stock, the company has consistently been raising dividends at a high growth rate for the past 6 years.
And overall, that dividend growth rate has been awesome.
Take a look at the annual dividend payments since 2012 –
- 2012 – $0.36
- 2013 – $0.65
- 2014 – $0.74
- 2015 – $0.82
- 2016 – $0.99
- 2017 – $1.13 (projected)
Note – The 2017 dividend has been prorated to reflect a dividend increase during the year (after the first quarter payout).
As you can tell from the numbers above, CSCO dividends have been raised consistently over the past several years with awesome growth.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. Cisco Systems has shown much higher DGR’s above 6% for the past 6 years.
Here are a few average growth rates for shares of Cisco Systems –
- 1 Year DGR – 14.14% (2016 to 2017)
- 3 Year DGR – 15.23% (2014 to 2017)
- 5 Year DGR – 28.02% (2012 to 2017)
Overall, the dividend growth of the company has been well over double digits – which is what I love to see!
This is one of the reasons why we have started adding shares of the company to our dividend growth portfolio.
Cisco Systems – Buy, Sell, or Hold?
We started buying shares of Cisco Systems (CSCO) only a few months ago – December 2016 from our Robinhood account.
Since that time, we have earned $1.56 in dividends from the company. We own these shares in our Robinhood account, so there is no option for DRiP which means no additional shares have been earned from dividends.
Note – Even though we don’t have DRiP for our CSCO shares, we have used our dividends to fund other purchases.
Here are a few stats from owning stock in Cisco Systems –
- Total Investment – $305.93
- Shares Purchased – 10.000
- Dividends Earned – $1.56
- DRiP Shares – 0.000
At the time of this writing, CSCO meets MOST of our stock screen criteria based on the following metrics –
- Current Yield – 3.39%
- Payout Ratio – 49.52%
- P/E Ratio – 14.63
The company meets all of the criteria that we look for when picking stocks – except the number of consecutive years raising dividends (which is 10). However, the company does have a current yield >= 2%, payout ratio <= 60%, PE under 20, and DGR's > 6%.
Based on all of this, we have been buying shares of CSCO as funds allow from our Robinhood account. I feel that mixing in this Information Technology stock will help our long term dividend growth rate.
Recently, every time we get funds in our cash balance in our Robinhood account, we have been using it to buy a share or two of Cisco Systems.
So we are basically using all the dividend payments we are receiving from other stocks in our Robinhood account to buy new shares of CSCO.
This is our own version of dividend reinvestment through Robinhood.
None of this would actually be possible however if Robinhood didn’t offer free trades. We can take about $30 to $35 and buy a single share of CSCO whenever we want without worry about fees or commissions.
At this time, I feel that Cisco Systems (CSCO) is a BUY for our dividend growth portfolio. The only thing holding us back (just a little) is the lack of dividend history (currently 6 years).
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – CSCO & ED. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.