Thursday, November 14, 2013

Christmas in November?

After patiently sitting on a chunk of cash in my RRSP portfolio, eagerly waiting for a market over-reaction to a negative earnings report, and hoping it would happen to a US dividend grower, I was very happy to read about Cisco Systems (“CSCO”) reporting Q3 results that fell (barely) short of analyst expectations. The fact management also revised their full year estimates downwards (ever so slightly), made my morning even brighter. Cisco has been on my watch-list for over a year, and I have been waiting for a good entry point into this market leader that gushes cash. I gladly placed a buy order this morning, bought shares at a bargain basement price, and welcomed a new additional to my RRSP.

Why do I like Cisco so much?
-          Entry point provided me yield of 3.3%
-          The company’s relatively low payout ratio 30-35%
-          Recently announced plans to increase their share buyback program
-          A history of revenue, earnings, and dividend growth (from $0.12/share to $0.68 in the last 4 years)
-          A strong balance sheet (more cash than debt), great free cashflow generation, and strong margins (gross margin =~ 60%)
-          A world leader in their segments which helps me diversify globally
-          Issuer ratings of A+/Stable, A1/Stable

I could go on and on. I’m so happy to have this great company as part of my investment portfolio. I feel like Christmas came early this year. 

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