Sunday, October 4, 2020

Recent Buy: Cisco

Last week I purchased 35 shares of Cisco Systems Inc. (ticker: CSCO) for $ 39,11 per share. CSCO pays a quarterly dividend of $0,36 so this purchase adds roughly $50 per year before taxes and FX-change.

 The reasons of my purchase are as follows:
  • Cisco is quite cheap based on its forward PE-ratio: about 12,5x. In the past 5 years the PE-ratio hovered somewhere between 12 tot 20x so the current price seems relatively cheap.
  • I don't have a big exposure to tech in my portfolio, only IBM and Intel. 
  • Cisco's dividend yield is decent at about 3,7% and there is room for growth with a payout ratio less than 50%.
  • Dividend growth in the last 5 years has been really solid at 13%. I don't expect this growth to continue (although it would be nice) but a dividend growth of 6-8% coupled with a dividend yield of 3,7% and buybacks will deliver a solid total return.
  • Its balance sheet is rock-solid. Enough cash ($30 billion) to cover its entire debt-load. And if that's not enough, Cisco's annual free cashflow is enough to cover its debt load as well.
  • Total return in recent years has been less than the S&P500. I expect "reversion to the mean" works for Cisco as well.
  • The DGI community has been buying Cisco as well, so that counts for something :-)
Thanks for reading! What do you think of my purchase?

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