While the numbers always seem to look ok, the stock has done basically nothing in terms of growth. Of course the dividend yield of 3.10% is still appealing for our Team Alpha Retirement Portfolio, the growth and income portfolio sees the stock as lagging, and not meeting our needs for growth.
Raising Cash To Redeploy Into Better Opportunities
We might have considered holding this stock longer, but as we move into 2014, we believe there will be better opportunities to put this cash to work. We would like to see another well run growth company added to this portfolio, and we are considering Google (GOOG) to replace CSCO, although we have not decided as of this writing.
If we simply look at the performance of each, comparatively, you can see what we are talking about:
Over a 4 year period, Google has been growing and becoming ever more powerful a company, while CSCO has been bound to a trading range, without an apparent catalyst for growth.
The fact that CSCO decided to employ a value approach by offering a compelling dividend, also lends credence to our opinion that the stock belongs in the TARP group, and NOT the TAGI portfolio.
With the implementation of the dividend in 2011, CSCO has given us (at least me, anyway) a clear signal that it will become more of a dividend growth investment rather than a growth and income investment.
We love the fact that the dividends have nearly tripled since 2011, and the company seems poised to direct more cash to increase those dividends every year. What we love for TARP we simply do not need in TAGI.
Another issue is the fact that TAGI has very little cash reserves. As of the last update, the cash reserves were a paltry $480. the sale as of right now will put another $2750 into those reserves for a total of about $3200 for redeployment.
The Bottom Line
We are taking a small loss on Cisco at the start of 2014, but feel comfortable to continue holding the stock in our Team Alpha Retirement Portfolio, as it fits that portfolio more appropriately right now.
Can CSCO regain a growth status? We will keep an eye on it as we move our portfolios into our subscriber emails as of 2/15/2015.
If you agree with our conclusion and have been following these portfolios, you might want to consider this action as of right now.
Disclaimer: The opinions of the author is not a recommendation to either buy or sell any security. Please remember to do your own research prior to making any investment decision.