Why These Dividend Stocks Should Be on Your Radar
Concerns regarding the fiscal cliff showed the value of dividend payers as several companies rushed to accelerate payments in the interest of shareholders. Also, there are several payers that have begun to increase their growth rate, giving investors the best of both worlds.
Here are a few names to consider.
Aside from offering one of the best yields at 2.80%, there are many more reasons to love Cisco. The networking giant is a sure-fire bet to hit $30 per share this year. The company has been a model of execution over the past two years, posting seven consecutive earning beats.
In its most recent quarter, Cisco posted net income of $2.6 billion, or 48 cents per share, on revenue of $11.9 billion. Not only did this represent 6% revenue growth, but net income surged 11% as profitability continues to improve. Likewise, the company advanced gross margins sequentially by roughly half of a point, exceeding expectations.
Management has come under fire over the past couple of years, but they deserve considerable credit for this turnaround, which has included a rash of M&A deals. The company's recent shopping spree includes spending $1.2 billion for Meraki and most recently $141 million in cash, bringing its cloud-based acquisitions to nine in 2012.
Cisco is looking to leverage its strong services business, which grew by 12% with more cloud-based purchases. The company understands that once enterprises start migrating fully into the cloud, software will become "the new hardware."
With the cloud market projected to grow to $177 billion within the next two years, there's not a company in a better position to capitalize on that growth. Also, with a strong balance sheet, respectable yield and very limited downside risk, patient investors would do well taking a position here at current levels. At minimum the stock will trade at $25.
Microsoft has been a disappointment over the past couple of years. The company's inability to compete effectively with Apple(AAPL) is widely documented. But the software giant has always been an excellent payer with a current yield of 3.40%. Also, the company has just raised its payout from 20 cents to 23 cents.
The good news is this will protect the stock from massive sell-offs. Unfortunately, it provides no answers as to how the company will address weakness in the mobile devices market and in the enterprise, where it is also losing share to Oracle(ORCL) in the now popular cloud and Software as a Service (SaaS) market. Also, if Microsoft's first quarter was any indication, the company still has a lot of work to do.