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With dividend stocks, you can't really go wrong. You get a guaranteed check each quarter, and any capital gains to go along with it. When these stocks have been brought down by unjustified pessimism, the opportunity for profit becomes even greater. Coca-Cola (NYSE:KO) and Cisco Systems (NASDAQ:CSCO) are two stocks that offer a decent dividend and have potential for capital gains. These companies are bringing in massive amounts of revenue in an efficient manner, have strong financials, and can be bought with a significant margin of safety.

The Coca-Cola Company has a reputation of being an ideal stock for a conservative investor. It has been increasing its dividend for decades, and the yield is currently at 2.80%, or $1.02 per share. Too often investors mistake small dips and rises in this company's stock price, such as this one, as something significant. But in the end, it can be accounted to general market fluctuations and slight panics. But Coca-Cola, in a way, is too big to fail. Not that investors are fearing a real collapse, but the small pullbacks seem unjustified when historically, this company has not only been extremely successful, but even iconic in America. Having a few analysts who aren't happy with earnings simply gives you a better chance to buy. And make sure you do so quickly, as this article warns of the possible incoming dividend increase. Coca-Cola has consistently raised its dividend for about 5 decades, and operations are still strong enough to continue doing so (year-over-year earning increased nearly 13% in the last report). Since 2008, Coca-Cola has announced a dividend increase each year in February.

Also, Coca-Cola is displaying tremendous growth in emerging markets. As economic conditions improve in Eastern Europe, Africa, and Asia, consumers there are buying more Coca-Cola: buyers in these regions brought a 10% increase in volume in the last quarter. In general, the company has been improving despite its already massive size, as it has built up a business that generates $48 billion in revenue annually. Its main competitor, PepsiCo (NYSE:PEP), has not managed to slow Coca-Cola's growth over the years, as it develops a number of successful brands such as Sprite, Dasani, Fanta, and much more.

This long term investment is at affordable levels and has strong financials:

P/E (trailing twelve months) 18.99
Price/Sales 3.43
Price/Book 5.02

Revenue

48.02 B
Profit Margin 18.78%
Quarterly Earnings Growth (yoy) 12.80%

Tech giant Cisco Systems has been a massive part of the networking and communication devices industry since it really took off in the mid 90's. In the last quarter, Cisco reported a revenue of 47.25 billion dollars. Strangely enough, all that people want to remember about the stock is its fall from grace after the dot com boom, which has resulted in overly cautious attitudes toward the stock. Since then, the stock has floated around between about 15 and 30 dollars. It currently trades at $20.99, which is a price that is more than fair. This company, despite its massive size, is still growing. In the last quarter, it reported a 44% increase in earnings. The chart below shows the consistent annual revenue increase that Cisco has enjoyed in the past 10 years. This has been the work of a number of products, including routers, data security systems, and other network technologies that meet the needs of people all over the world. Already generating massive revenue, the company plans on continuing to expand. In the next five years, analysts estimate that Cisco will grow at a rate of 8.40% per annum.

With the cloud computing market expanding rapidly, Cisco looks to move further into the software market in the coming years. Strategically, this is a great move, as the hardware industry is watching software skyrocket as companies look for simpler ways to operate. Cisco is jumping in at the right time, and investors can look for increases in earnings as experienced CEO John Chambers leads a smooth and rewarding transition into the software market.

CSCO Revenue Annual Chart
(Click to enlarge)

CSCO Revenue Annual data by YCharts

The company is financially healthy and has a very fair price. The profit margin is just under 20%, and it has 46.38 billion dollars of cash on hand. It is trading at just 12.07 times earnings and has a price/book of 2.01. On top of all this, Cisco Systems offers a 56 cent dividend, making for a 2.70% yield.

Source: 2 Undervalued Dividend Stocks