Why Cisco's Weak Guidance Creates an Opportunity for Dividend Investors

Cisco's (NASDAQ: CSCO) fiscal first-quarter results surpassed expectations, but investors worry about the forecast for a next-quarter revenue decline after two years of growth. As a result, the stock price dropped below $45 and the dividend yield now exceeds 3.1%. The negative market reaction provides an opportunity to invest in this tech stock that pays a safe dividend.

Cisco's revenue growth of 2% reached the top end of management's guidance range of 0% to 2%. But keep in mind Cisco's tricky reporting: The company excludes divested assets, which provides shareholders with a fair year-over-year comparison. However, it doesn't exclude the contribution from its acquisitions, which provides rosier revenue growth compared with its organic growth (i.e., without acquisitions). Without the acquisitions, year-over-year revenue would have increased by 1.5% only.

The infrastructure platforms segment -- core networking technologies such as switching, routing, and wireless products -- dropped by 1% year over year. Management indicated only routing declined and, once again, service providers caused this underwhelming performance. But the two other product segments -- applications and security -- increased by 6% and 22%, respectively. And services, up 4% year over year, also contributed to the total revenue growth.

Source Fool.com