Cisco Systems (Nasdaq: CSCO) ranks as the world's largest computer network solutions company. Faced with the pressure during the demand for softening its hardware offerings, it adopts a business model more focused on software.
It invests in its transformation through internal development and a strong surge of acquisitions. In 2016, Cisco bought $ 1.4 billion from Jasper, an Internet of Things platform, and has also spent more than $ 4.4 billion this year, acquiring companies, including AppDynamics , Viptela and MindMeld, to strengthen strength in areas such as application management, artificial intelligence and extended networks defined by software, and to help it evolve recurring revenue.
Cisco's dividend has recently generated 3.6 percent and, with the company spending less than 55 percent of its profits on dividend payments, it has a lot of money to support its dividend and enough room in its income statement to be able to increase payments in the future. In fact, Cisco has increased its dividend each year since it began paying dividends in 2011.
With Cisco's price-earnings ratio (P / E) recently in midereens, its valuation is far from being steep. This is partly due to the company's relatively low earnings growth in recent years. Cisco also expects slow growth over the next few years. Yet, its transformation of business model should position it well for the future. (The Motley Fool recommended Cisco Systems.) .
