Cisco Is Best-Performing Dow Stock of 2019

Technology

Published: April 6, 2019 8:50 am

Last Updated: January 30, 2020 10:24 pm

Technology is back on top. Among the Dow Jones industrials, Cisco Systems Inc. (NASDAQ: CSCO), the huge global provider of routers, leads the index. Its shares are up 27.42% year to date to $55.21. The Dow is higher by 13.28% to 26,424.99. Cisco was also the best-performing Dow stock of the first quarter.

One reason the shares continue to surge is that the improvement of Cisco’s revenue and earnings growth may not be over. S&P Global’s Erin Gibbs recently told CNBC, “It’s just growing so fast. Its profits are expected to grow about 18 percent this year. … Super healthy cash flow, they have a 6 percent dividend yield, so just a really strong company fundamentally, and you’re actually getting it at a decent price or valuation, even if it is hitting highs. So we really like Cisco.”

Another reason Cisco has done so well is the massive build-out of 5G superfast wireless around the world. This is a replacement for the current 4G networks used for many of the world’s wireless devices. 5G is 20 to 50 times faster than 4G. The build-out will cost carriers tens of billions of dollars. Cisco products are critical to this expansion.

In the most recent period, Cisco’s second quarter of 2019, revenue rose 7% to $12.2 billion. Cisco had net profits of $2.8 billion, compared to a loss of $8.8 billion in the year-ago period. Cisco’s M&A activity affected earnings. The company stated: “As previously disclosed, Cisco completed the divestiture of the Service Provider Video Software Solutions (SPVSS) business in the second quarter of fiscal 2019 on October 28, 2018. Revenue, non-GAAP financial information, and Q3 FY 2019 guidance have been normalized to exclude the SPVSS business from prior periods for comparative purposes.”

The company also announced it was giving more money back to shareholders: “Cisco has declared a quarterly dividend of $0.35 per common share, a 2-cent increase or up 6% over the previous quarter’s dividend, to be paid on April 24, 2019 to all shareholders of record as of the close of business on April 5, 2019.” Additionally, “Cisco’s board of directors has also approved a $15 billion increase to the authorization of the stock repurchase program. There is no fixed termination date for the repurchase program.”