CSCO vs MSFT: Dividend Comparison
Dividend data as of
Cisco Systems, Inc. (CSCO) and Microsoft Corp (MSFT) are both in the Information Technology sector, making them natural rivals for dividend investors. CSCO offers a significantly higher 1.89% yield compared to MSFT's 0.84%, a gap of 1.05%. Both stocks show similar dividend growth rates, each around 10.1% over the past five years. MSFT holds the edge in dividend safety with a "Safe" rating. MSFT is a Dividend Contender with 20 years of consecutive increases.
Verdict
Yield Analysis
CSCO yields 1.05% more than MSFT. In dollar terms, CSCO pays $1.63/share vs MSFT's $3.48/share annually.
Dividend Growth
CSCO: Dividend growth is accelerating — the 3-year CAGR of 18.0% exceeds the 5-year rate of 10.1% and the 10-year rate of 8.5%.
MSFT: Dividend growth has been steady, with a 3-year CAGR of 10.4% and a 5-year CAGR of 10.3% (10-year: 9.8%).
Dividend Safety
CSCO: The payout ratio of 63% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.6x.
MSFT: The payout ratio of 21% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 4.6x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in CSCO vs MSFT today?
At $77.17 per share, $10,000 buys about 129.6 shares of Cisco Systems, Inc. (CSCO). Each share pays $1.63 per year in dividends, so the position starts out generating roughly $211 per year — about $18 a month.
At $401.99 per share, $10,000 buys about 24.9 shares of Microsoft Corp (MSFT). Each share pays $3.48 per year in dividends, so the position starts out generating roughly $87 per year — about $7 a month.
CSCO is the larger income stream from day one: $125 per year more on the same $10,000 invested.
What could $10,000 of CSCO or MSFT income look like in 10 years?
Cisco Systems, Inc. (CSCO) has raised its dividend about 10.1% a year over the past five years. If that pace held, the $189 per year that $10,000 generates today at the current 1.89% yield would reach $494 per year by 2036 — a 4.9% yield on the original cost.
Microsoft Corp (MSFT) has raised its dividend about 10.3% a year over the past five years. If that pace held, the $84 per year that $10,000 generates today at the current 0.84% yield would reach $224 per year by 2036 — a 2.2% yield on the original cost.
On those trailing rates, CSCO pays more in 2036: $494 versus $224 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would MSFT's dividend growth overtake CSCO's higher yield?
It doesn't, on the trailing numbers. Cisco Systems, Inc. (CSCO) yields more today (1.89% vs 0.84%) and has also grown its dividend at least as fast (10.1% vs 10.3% a year over five years). Unless MSFT accelerates its raises or CSCO stumbles, MSFT never closes the income gap — CSCO wins on both current income and growth.
Can CSCO and MSFT afford their dividends?
Cisco Systems, Inc. (CSCO) earns $2.59 per share against $1.63 paid out in dividends — 1.6x coverage (a 63% payout ratio).
Microsoft Corp (MSFT) earns $15.96 per share against $3.48 paid out in dividends — 4.6x coverage (a 21% payout ratio).
MSFT's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for CSCO if earnings weaken.
Which fits an early-retirement income portfolio better, CSCO or MSFT?
For income you need right now, Cisco Systems, Inc. (CSCO) leads: $100,000 invested today pays about $157 a month at the current 1.89% yield, versus $70 a month from Microsoft Corp (MSFT) at 0.84%.
On consistency: MSFT has raised its dividend 20 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $595/yr in CSCO vs $243/yr in MSFT by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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