Updated 3/6/25

Cisco Systems (NASDAQ: CSCO) is a well-established technology company known for its leadership in networking, software, and cybersecurity. Over the years, it has evolved to remain relevant in an industry that is constantly shifting. For investors looking for stable dividend payers, Cisco presents an interesting case.

While it may not offer the highest yield in the market, its track record of consistent dividend growth and strong cash flow generation makes it appealing. Let’s take a closer look at the dividend and the broader financial picture to see how it stacks up for income-focused investors.

Key Dividend Metrics

💰 Dividend Yield – 2.59%
📈 5-Year Average Yield – 3.04%
💵 Annual Dividend – $1.64 per share
🔄 Dividend Growth Streak – Over 14 years
📊 Payout Ratio – 70.18%
📅 Next Ex-Dividend Date – April 3, 2025
📆 Next Dividend Payment – April 23, 2025

Dividend Overview

Cisco has been paying and increasing its dividend for well over a decade. Since introducing its dividend in 2011, the company has maintained a steady commitment to rewarding shareholders.

At a 2.59% yield, the payout is slightly below its five-year average of 3.04%. This suggests that the stock price has appreciated, making it a bit more expensive compared to past valuations. While it may not be a high-yield stock, the dividend is backed by strong free cash flow, which is key for sustainability.

The payout ratio currently sits at 70.18%, which is somewhat on the high side for a tech company. Typically, a ratio closer to 50% is preferred, as it allows more flexibility for reinvestment. However, Cisco’s strong cash flow means the dividend still appears secure.

Dividend Growth and Safety

One of the reasons investors are drawn to Cisco is its ability to increase dividends year after year. Over the past five years, the company has delivered a dividend growth rate of around 6% annually. However, the most recent increase was a more modest 3%, indicating a potential slowdown in future growth.

From a safety standpoint, the dividend is well-covered by cash flow. The company generated $13.29 billion in free cash flow over the last year, which is more than enough to cover dividend obligations.

The balance sheet is also in relatively good shape, though debt levels have risen in recent years. Cisco holds $17.64 billion in cash, which helps offset its total debt of $32.42 billion. While the company is not in danger of cutting its dividend anytime soon, investors should monitor the payout ratio and future earnings growth.

Chart Analysis

Trend and Moving Averages

Cisco’s stock has been in a strong uptrend, as seen in the consistent rise from the lower levels of last year. The 50-day moving average (orange line) has been above the 200-day moving average (blue line) for a while now, signaling a bullish trend. This golden cross formation, which occurred months ago, has been a key driver of momentum, attracting buyers along the way.

However, recent price action suggests the stock may be hitting a point of consolidation. The price has flattened near its highs, and while it remains above both moving averages, the rate of upward movement has slowed. The 50-day moving average is still serving as a dynamic support level, but any drop below it could indicate a short-term trend shift.

Volume and Buying Pressure

The volume bars below the price chart show a steady level of trading activity, though there have been a few significant spikes along the way. Higher volume days in December and February suggest institutions were actively participating, potentially accumulating shares.

Lately, volume has been tapering off slightly, which coincides with the price stalling near the recent highs. A decline in volume while price consolidates often signals that traders are waiting for a catalyst before making their next move. If volume picks up on an upward breakout, it would confirm continued bullish momentum. On the other hand, increased selling volume could suggest profit-taking or a reversal.

Relative Strength Index (RSI)

The RSI is currently hovering around 52, indicating that the stock is in neutral territory. Earlier in the uptrend, the RSI moved into overbought territory above 70, signaling strong bullish momentum. Now that it has cooled off, it suggests the stock is no longer in an overheated state.

This current RSI level means there is room for the stock to move in either direction. If the RSI starts climbing back toward 70, it could indicate renewed strength. However, if it drifts toward 40 or lower, it may be an early warning sign that sellers are gaining control.

Recent Price Action and Candlestick Patterns

Looking at the last five candlesticks, there are signs of indecision in the market. The candles have relatively small bodies, meaning the stock is not making large moves in either direction. Some have longer upper wicks, which can indicate selling pressure near the highs. This suggests that while buyers are still in the game, there is some hesitation or resistance preventing the stock from making a clean breakout higher.

The overall pattern is one of consolidation, where buyers and sellers are closely matched. If a clear breakout occurs—either above the recent highs or below the 50-day moving average—it could determine the next direction for the stock.

Analyst Ratings

⬆️ Upgrades

🟢 Rosenblatt Securities recently upgraded Cisco from a neutral stance to a buy recommendation, raising its price target from $66 to $80. This positive shift was driven by Cisco’s strong quarterly performance, where revenue climbed 9% year-over-year to $14.0 billion, with earnings per share coming in at $0.94, exceeding expectations. Analysts pointed to Cisco’s expanding software subscription business and growing influence in artificial intelligence as key factors supporting the upgrade.

📈 Citigroup maintained its buy rating but made a slight adjustment to its price target, moving it from $71 to $73. The firm remains optimistic about Cisco’s market position and sees continued strength in enterprise networking demand.

⬇️ Downgrades

🔴 StockNews.com recently shifted its rating on Cisco from strong buy to buy, signaling a slightly more cautious stance. While the firm still sees Cisco as a solid investment, the downgrade suggests that some near-term headwinds could impact growth.

🎯 Consensus Price Target

The 12-month consensus price target for Cisco currently stands at $66.63, indicating a potential for modest upside from current levels. Analyst sentiment remains divided, with some projecting continued growth through software and AI expansion, while others are more cautious due to market competition and economic uncertainties.

Cisco continues to hold a strong position in the tech space, and these recent rating changes highlight the need for investors to stay updated on how the company navigates evolving market conditions.

Earnings Report Summary

Cisco’s latest earnings report gave investors plenty to digest, with solid revenue growth, strong demand for its products, and a continued push into artificial intelligence.

For the quarter, the company brought in $14.0 billion in revenue, marking a 9% increase from the same time last year. That’s a solid beat compared to expectations and shows that demand for Cisco’s networking and security solutions remains strong. Earnings per share came in at $0.61 on a GAAP basis and $0.94 on a non-GAAP basis, which also topped analyst estimates.

One of the biggest highlights was the impressive surge in product orders. Overall, orders jumped 29% year-over-year, and even without factoring in the recent Splunk acquisition, orders were still up 11%. AI is becoming an increasingly important piece of Cisco’s strategy, and the company reported $350 million in AI-related infrastructure orders this quarter alone, bringing the total for the first half of the year to about $700 million.

Profitability remained strong, with gross margins of 65.1% on a GAAP basis and 68.7% on a non-GAAP basis. Those numbers show that Cisco has been able to balance revenue growth with operational efficiency, keeping costs in check while expanding its business.

Cisco also rewarded shareholders by announcing a $15 billion expansion to its stock buyback program. On top of that, the company increased its quarterly dividend by 3% to $0.41 per share, showing confidence in its cash flow and long-term outlook.

Looking ahead, Cisco is feeling optimistic about the rest of the year. The company raised its full-year revenue forecast, now expecting to bring in between $56.0 billion and $56.5 billion. It also boosted its non-GAAP earnings per share projection to a range of $3.68 to $3.74, suggesting confidence in its ability to sustain profitability.

With strong demand for its core products, a growing AI business, and a shareholder-friendly approach, Cisco’s latest earnings report paints a picture of a company that’s staying competitive while continuing to evolve.

Financial Health and Stability

Cisco has historically been a financially strong company, and while that remains true, there are some trends worth noting.

• Profit Margin – 16.96%
• Return on Equity – 20.02%
• Debt-to-Equity Ratio – 71.21%
• Current Ratio – 0.87

The company remains profitable with solid margins, but its debt levels have crept higher. The debt-to-equity ratio of 71.21% suggests that Cisco is using leverage more than in the past. However, given its strong free cash flow, this is not an immediate concern.

Another factor to consider is the company’s institutional ownership, which stands at nearly 80%. This indicates that large funds and investors have confidence in Cisco’s long-term stability.

Valuation and Stock Performance

Cisco’s valuation suggests that it may not be the bargain it once was. The trailing price-to-earnings ratio is 27.81, while the forward P/E is 17.09. Compared to historical levels, this indicates that the stock is trading at a premium.

Additional valuation metrics include:

• PEG Ratio (5-year expected) – 3.15
• Price-to-Book Ratio – 5.54
• Price-to-Sales Ratio – 4.71

The stock has been on a solid run, trading near its 52-week high of $66.50. It is also above both its 50-day and 200-day moving averages, signaling positive momentum. While this is good for current shareholders, potential investors may want to wait for a more attractive entry point.

Risks and Considerations

While Cisco remains a strong dividend payer, there are a few risks investors should keep in mind.

Slowing Growth in Core Business

Cisco’s core business is still largely tied to networking hardware, which has seen slowing growth in recent years. While the company has expanded into software, cloud, and AI-driven security, competition in these areas is fierce. Investors should keep an eye on whether these segments continue to gain traction.

High Payout Ratio

With a payout ratio above 70%, Cisco does not have as much flexibility as some of its peers when it comes to dividend growth. If earnings slow or cash flow tightens, future increases may be more conservative.

Market Cycles and Volatility

Cisco has a relatively low beta of 0.78, meaning it is less volatile than many tech stocks. However, broader economic downturns or reductions in enterprise IT spending could impact the company’s earnings.

Rising Debt Levels

The company’s total debt has increased over time, which is something to monitor. While it is not an immediate problem, higher interest rates could make refinancing more expensive in the future.

Final Thoughts

Cisco remains a solid choice for dividend investors, offering a stable yield and a long history of payouts. The company’s strong free cash flow supports its dividend, and management has continued to reward shareholders with steady increases.

That said, at its current valuation, the stock may not be a bargain. The payout ratio is on the high side, and dividend growth has slowed slightly. For those looking to start a position, it might be wise to wait for a pullback before jumping in.

Overall, Cisco is a dependable dividend payer, but investors should keep an eye on future earnings growth and valuation before adding shares.