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As I've mentioned previously, I'm seriously considering getting rid of Intel Corp. (NASDAQ:INTC) in the USDP. It's not that I don't think the company can rebound but I prefer getting rid of a name earlier than regretting holding when unfortunate things start happening (such as a dividend drop). The USDP has not seen any of its stocks reduce dividends to this date (knock on wood!!). So what am I looking for? Stocks with long-term growth potential in terms of revenues, earnings and dividends. Unfortunately, if I'd like to replace it with another technology name, there aren't that many candidates. Yes, there are more options than a few years ago but it's not quite the same as looking for companies such as utilities, etc.

Today, I decided to take a deeper look into Cisco by using the top 20 things I look at when judging dividend stocks:

Dividend Metrics

(click to enlarge)

I obviously prefer to hold stocks that have long histories of paying dividends but in the tech sector that is a lot more difficult to achieve. Cisco has been paying dividends since 2011 and has increased them steadily. The 2.82 current yield isn't exceptional but it's certainly good enough for me to consider adding the name.

Company Metrics

Here, the numbers are much stronger. Sales and earnings are growing at a steady rate, the payout ratio is very reasonable and Cisco has very little debt. I do have one area of concern though and as you might imagine, the P/E ratio is a bit high for me. I do, however, appreciate the fact that while the current P/E is a bit higher, the projected one for next year is much more reasonable at 10.64.

Just look at the 5-year revenue chart:

CSCO Revenue Quarterly Chart

CSCO Revenue Quarterly data by YCharts

Stock Metrics

CSCO Chart

CSCO data by YCharts

Industry Metrics

Cisco is very well positioned in the fast growing network sector. It faces a lot of competition but very few of those names have the name and power to go after those bigger government and multinational accounts that Cisco is able to secure. Also, while many smaller players are able to compete on the software part, Cisco remains very dominant and difficult to compete with in terms of both hardware equipment and ore integrated solutions.

Is It Good Enough?

I'm still contemplating a few different options but I think it's fair to say that Cisco has a strong profile and less uncertainty than a company such as Intel Corp. Logically, there is less upside as well but in the context of a long-term income portfolio, that is often something that comes with these picks.

Disclaimer: No position on CSCO

Source: Is Cisco Good Enough To Make The USDP?