Should Investors Buy Cisco for its Dividend?

Cisco Systems Inc (NASDAQ:CSCO) has fallen 14% over the past three months and the stock is getting close to lows not seen since January when it was trading below $45 per share.

Concerns surrounding trade with China and a disappointing forecast have led to the stock’s poor performance over the past few months and could send it even lower.

Over the long term, however, trade issues are likely to resolve, and that could make Cisco a great stock to buy on the dip. With a lower share price, the stock is now paying investors a higher yield, which is currently at more than 2.9% per year. That’s a decent payout for a tech stock that’s risen nearly 90% in five years.

Not only does Cisco pay a great yield today, but the company has also increased its payouts over the years as well. Five years ago, the stock was paying its shareholders a dividend of $0.19 every quarter.

Those payments have since increased by more than 80% to $0.35. That averages out to a compounded annual growth rate of 13%. However, the most recent dividend hike was from $0.33 to $0.35, a bump up of just 6%.

Nonetheless, investors enjoyed dividend increases for several years and as long as the company keeps producing profits, Cisco could be a great long-term buy for dividend investors.

Currently, the stock is trading at only 18 times earnings, which means investors are not paying a big premium for a company that has generated more than $50 billion in sales over the past four quarters and it could prove to be a great deal today.