Three Of My Favorite Dividend Stocks For 2017

Cisco Systems, Inc. (NASDAQ:CSCO)

Business Model:

Cisco Systems, Inc. (NASDAQ:CSCO) is the reference for switches and routers across the world. The way we transfer data throughout networks has been a pillar for many industries over the past decade. While 2/3 of Cisco’s revenue comes from switches and routers, the rest of Cisco’s sales are coming from faster-growing adjacent market segments such as wireless, security, collaboration, unified communications, and data center products.

Main Strengths:

As Cisco is the undisputed leader in its industry, this is also the player which sets the standard for others. This enables Cisco to benefit from a stronger premium on all its products and services. As many companies are dependent on their networking system to operate on a daily basis, their costs to ditch Cisco are enormous. Cisco has built and protected a very strong niche here.

Potential Risks:

Unfortunately, or fortunately, technology keeps evolving. What Cisco Systems, Inc. (NASDAQ:CSCO) is today (the leader of switches and routers) could eventually disappear, as the need for routers may decline upon the arrival of new technology. However, since Cisco keeps acquiring smaller tech companies in order to stay on top of things, I’m not too concerned about this potential fate right now.

Dividend Growth Perspective:

The dividend payment has been increasing on a steady basis for the past 5 years while the payout ratio remained well under control around 50%. Cisco’s core business is very strong and generates a steady income to be distributed to shareholders. Dividend increases in the forthcoming years are well secured.

Investment Thesis:

The acceleration of the “IOTH” (Internet of Things), where literally everything is meat to communicate through a network is positioning Cisco in the driver’s seat for several years to come. As it is already established as a strong leader in this industry, there is more room for growth in the future.

Cisco Systems, Inc. (NASDAQ:CSCO) has the size and cash to secure their clients and answer their future needs. It can then continue to benefit from the strong bond it has established with its clients and offer further products to expand its revenue.

How I Selected Those 3 Companies

Before I select any companies to be part of my portfolio, I go through an exhaustive investment process. Each company must meet the 7 dividend investing principles. Those principles have been established based on several academic studies and over a decade of my financial experience in the stock market. I not only think those stocks will do well in 2017, but I believe they will do well in the long run too. In my opinion, those are keepers for a dividend growth portfolio.

Disclaimer: I hold MMM, BLK and CSCO in my Dividend Stocks Rock portfolios.