Cisco Systems (NASDAQ: CSCO) has been considered an excellent portfolio of dividends to investors seeking income. But with the title on 21% more in the last 12 months, Cisco and underlying dividend growth potential still worth investors higher price they have to pay to take advantage of this revenue stream?
Excellent dividends and history of operation:
Potential future dividends can often be better understood, looking back. While Cisco can not have a history of dividends, short history of dividends suggested the company is serious about its dividend. Cisco announced its first dividend in 2011, the dividend has more than tripled, increasing, at least once a year.
Furthemore, company operations profitable suggest a dividend is sustainable in the long run. The company has a significant history of strong positive free cash flow and growth, or cash flow from operating activities less capital expenditures - the class of investors operating income history would see a business that are waiting will pay a dividend growth constant in the long term.
Cisco is, hands down, a source of income. About 27% of the turnover of the company ends on cash flow as free. And the annual free cash flow of the company has fluctuated between $ 8.4 billion and $ 14.2 billion each year in the past 10. With an excellent track record of raking in substantial free cash flow is likely to Cisco easily to support payments dividends in the coming years.
Plenty of room for dividend growth:
If investors expect dividends Cisco to continue to grow in the future?
While the history of dividend increases Cisco supports this notion, the most important test for the further growth can be found by taking a near exact amount of free cash flow look Cisco is currently paying dividends.
Over the past 12 months, Cisco will pay only 36% of its free cash flow in dividends, leaving plenty of room to increase dividends in the future, if Cisco can maintain their current levels of free cash flow. Even if the annual flow of free cash is hit, there would probably still considerable scope for further increases in dividends.
Moreover, it is worth noting that Cisco could give a significant boost the dividend today, were it not for the repurchase program aggressive actions of the company. Cisco is spending more on repurchase of that dividend payments. During the most recent quarter for the company, Cisco will pay $ 974 million in dividends, and the repurchase of $ 1.2 billion in shares. In fiscal 2014, Cisco has spent $ 9.5 billion in share repurchases and paid $ 3.8 billion in dividends. If, in the future, stocks go up enough to deserve more conservative management of the repurchase value, investors tend to see your cash flow more freely assigned to the payment of dividends.
Most recent dividend increase of the company was 10.5%. Although slower than the growth of 21.4% last year, it's safe to say that the increase of 10.5% in 2015 can be considered as indicative of a reasonable expectation of an increase in annual dividends Cisco in the future. The company has more than enough free cash flow sustainable to deserve the 10.5% increase in dividends in the coming years.
This fiscal year, the quarterly dividend of $ 0.21 per share from Cisco will be an annual payment of $ 0.84, or a dividend yield of 3.1% at the current price. Not bad. But Cisco dividend looks much better when you think that you can be here. If dividend Cisco has continued to grow at 10.5% annually, the dividends from the company in five years could be equal to $ 1.38 per year, or 5% of the basis of current costs. Although this is only a potential scenario, significant free cash flow of Cisco and its history of dividend increases make this rather conservative estimate.
Sure, Cisco may not be a screaming buy dividend investors. But possible future dividend increases makes the action deserves a closer look, even after a 21% increase in the last 12 months.
No comments:
Post a Comment