Shares of CSCO have been on the rise over the past two years, climbing over 70 per cent in value since early 2016. Still, at $44 and change (all figures in US dollars unless noted), the stock is a long way from its $82.00 high back in the year 2000 when the company boasted a market cap of over $500 billion.
“We didn’t like it almost a generation ago in 2000 when it was $84 a share, when there was no dividend and it was trading at 100x earnings,” Dietze told BNN. “Fast-forward 18 years here and it’s one of the fastest growing dividend payers out there, it has now an above-average yield, which is unusual, particularly in the tech group. The valuation is far more reasonable and they have a solid business.”
What Cisco lacks in growth, it seems to be making up in consistency, producing revenue and net income that have stayed in the $48 billion and $10 billion range, respectively, for the past four years. Its dividend yield currently sits at a healthy 3.02 per cent.
“There are some fierce competitors — the one that comes to mind is Arista Networks, which is really pushing them quite hard,” says Dietze. “Some of the key employees from Cisco went over there. It’s pushing them quite hard in their internet infrastructure businesses.”
“Basically, [Cisco’s] is old-line tech, it’s legacy tech,” says Dietze. “It’s a good position to have exposure to the area. It’s not going to be growing as fast as it did 20 years ago, but we still like it for the dividend.”