Cash-Rich Cisco


Stocks are trending up again after a horrible September. But unlike the post-pandemic bull market, high-interest rates will likely favor companies with solid balance sheets. A company like cash-rich Cisco Systems (NASDAQ:CSCO) should do well. Cisco is generating enormous amounts of free cash flow [FCF], enough to reinvest in the business, conduct bolt-on acquisitions, and reward shareholders in a disciplined manner. That said, Cisco has difficulty generating revenue growth because it operates in a mature industry, networking. The rapid growth days are in the past. But Cisco has a comprehensive suite of products and a significant installed base and is a prolific acquirer of smaller companies that allow it to grow. Moreover, the company’s stock is yielding 3.6%+ and it has increased the dividend for the past 12 years making Cisco a Dividend Contender. Hence, I think cash-rich Cisco is a buy.

Overview of Cisco

Cisco was founded in 1984 and had its IPO in 1990. The company has grown rapidly into the market leader for networking. The company sells Internet Protocol-based networking to IT and communications companies. Specifically, Cisco sells hardware, software, and services, including routers, switches, wireless access points, cybersecurity platforms, firewalls, collaboration software, etc. Total revenue was $51,577 million in the past twelve months and in the fiscal year 2022 (Cisco’s fiscal year goes through the end of July).

Revenue and Earnings Growth

Cisco’s revenue has been range bound for the past decade between ~$48 and $52 billion. The company operates in a mature market, and growth is challenging to come by. Customers are usually large enterprises, campuses, and data centers. However, despite tough competition, Cisco is the market leader in switching, routing, SD-WAN, and wireless. Also, the company has a strong position in security and collaboration software.

Cisco’s status as the market leader, combined with long-term relationships, makes it hard for new entrants to displace the company. Moreover, the firm’s ability to provide integrated solutions makes its product portfolio attractive…

Disclosure: Long CSCO

Please read the complete article at my profile on Seeking Alpha for Cash-Rich Cisco Is a Buy.

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