The Dividend Stock I’m Adding Before October
A pullback just handed income investors a lower entry price than Cisco paid for its own shares, and the October record date is closing fast. Here is why this AI networking play keeps beating consumer staples for a dividend portfolio…
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MyCisco (NASDAQ:CSCO | CSCO Price Prediction) position keeps growing, and I plan to buy again before the Oct. 2 record date locks in the next 42-cent quarterly dividend, payable on Oct. 21. When I shop for income, my reflex says grab a consumer staple. Every time, I end up back at Cisco because I want my next dollar in a company that pays me while its core business speeds up.
My thesis fits in one sentence: every AI data center needs a network, and Cisco sells the switches, silicon, optics, and security that run it. CEO Chuck Robbins said it on the August call: “The network remains an absolute critical factor as to whether AI deployments succeed or fail.”
Reason #1: Growth That Speeds Up Every Quarter
Fiscal 2026 revenue reached $63.33 billion, up 11.77%. The quarterly path tells the real story: growth of 7.53% in Q1, 9.71% in Q2, 11.96% in Q3 and 17.58% in Q4. Networking orders rose 40% in Q4, the eighth consecutive quarter of double-digit growth. AI infrastructure orders hit $9.3 billion for the year, roughly 4.5 times fiscal 2025. Management guides fiscal 2027 non-GAAP EPS to $5.05 to $5.11, up from $4.33.
Reason #2: 15 Straight Years of Raises
Cisco raised its dividend for the 15th consecutive year in fiscal 2026, and the quarterly payout has climbed from 6 cents in 2011 to 42 cents. Fifteen years is a streak worth respecting, though the true blue chips of income investing have run it more than three times as long (we ranked ten of those Dividend Kings by valuation in a free report for readers building income portfolios). Coverage looks solid to me: dividends cost $6.553 billion against operating cash flow of $14.177 billion. Total capital returned reached $12.7 billion, which management estimated at 99% of free cash flow, with $8.1B of buyback authorization still open.
Reason #3: A Pullback Hands Me a Better Entry
Shares traded around $106.49 on Sept. 29, down 3.62% over the past month and below the 52-week high of $129.88, after Piper Sandler cut its price target on growth concerns. Cisco itself bought about 13M shares in Q4 at an average of $111.53. I get a lower price than the company paid, at roughly 20x forward earnings and a PEG ratio of 0.981. Year to date, the stock is up more than 40%.
Why My Money Skips Arista
Arista Networks (NASDAQ:ANET) is the AI networking pure play most readers reach for first, and it pays no dividend. For an income portfolio built for retirement, that decides it. Cisco gives me AI networking exposure plus a quarterly check that has grown every year for 15 years.
Risks That Could Make Me Stop Buying
Margins are contracting. Q4 non-GAAP gross margin fell to 66.3% from 68.4% on AI hardware mix, and the CFO warned of “a slight gross margin headwind as we move through FY27.” Cash and equivalents dropped 23.8% to $7.22 billion, and hyperscaler orders arrive in chunks. My thesis lasts because operating income still rose 38.13% in Q4. I stop adding if AI orders roll over and management cuts fiscal 2027 guidance, or if capital returns exceed free cash flow and threaten the raise streak.
What Keeps My Buy Button Active
Cisco reports again on Nov. 12, guiding Q1 revenue to $18 billion to $18.2 billion. Robbins says “we’re only at the beginning of this super cycle,” and I intend to collect a rising dividend every quarter while it plays out.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
