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Thursday, August 25, 2016

Recent Buy: Cisco Systems

Cisco Systems, Inc (CSCO) designs, manufactures, and sells internet protocol-based products and services and delivers integrated solutions to develop and connect networks around the world. The company serves businesses of various sizes, public institutions, governments, and communications service providers. CSCO sells its products directly, as well as through channel partners, such as systems integrators, service providers, other resellers, and distributors. The company was founded in 1984 and is headquartered in San Jose, California.

The stock is a Dividend Challenger with a track record of 6 consecutive years of dividend increases and a 3-year dividend growth rate of 31.6%. CSCO pays quarterly dividends of 26¢ per share in the months of January, April, July and October.

19 August 2016: Bought 300 shares of CSCO at $31.00 per share.
Exercised Option: 3 contracts of CSCO AUG 19 2016 31.00 P at $0.69 per contract.

This trade differs from my regular buys in that it stems from the exercise of put options I had sold. Earlier this month when I considered buying CSCO, shares were trading above $31 per share. Instead of buying shares, I decided to sell $31 puts and to collect a premium of 69¢ per put, figuring that an effective buy price of $30.31 would be preferable. As it turns out, CSCO traded below $31 per share last Friday (option expiration date) and so the puts got exercised.

300 shares of CSCO adds $312.00 to DivGro's projected annual dividend income. I've updated my portfolio to reflect this purchase.

To see how this trade turned out, please head over to Seeking Alpha and read this article.

In the article, I explain how I got paid to wait for CSCO's share price to reach my preferred entry point. The article includes a stock analysis of CSCO and I share my fair value estimate. The stock is trading at a nice discount to fair value!

Please feel free to leave comments on this article either at Seeking Alpha or here, on my blog. I'll do my best to respond to each comment as quickly as possible.

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