Dividend-Paying Technology

Cisco Systems (Nasdaq: CSCO) ranks as the world’s largest computer network-solutions company. Facing pressure amid softening demand for its hardware offerings, it’s adopting a more software-centric business model. It’s investing in its transformation through internal development and a big acquisitions push. In 2016 Cisco purchased Jasper, an “Internet of Things” platform, for $1.4 billion, and it has also spent more than $4.4 billion this year acquiring companies including AppDynamics, Viptela and MindMeld in order to build strength in fields such as application management, artificial intelligence and software-defined wide area networks — and to help it grow streams of recurring revenue. Cisco’s dividend recently yielded 3.6 percent, and with the company devoting less than 55 percent of its profits to dividend payments, it has plenty of cash coming in to support its dividend and enough room on its income statement to be able to boost payouts in the future. In fact, Cisco has increased its dividend every year since it started paying dividends in 2011. With Cisco’s price-to-earnings (P/E) ratio recently in the midteens, its valuation is far from steep. That’s due, in part, to the company’s relatively weak earnings growth in recent years. Cisco is projecting slow growth over the next few years, too. Still, its business-model transformation should position it well for the future. (The Motley Fool has recommended Cisco Systems.)