CISCO SYSTEMS INC. $47 (Nasdaq symbol CSCO; High-Growth Dividend Payer Portfolio, Manufacturing sector; Shares outstanding: 4.5 billion; Market cap: $211.5 billion; Dividend yield: 2.8%; Dividend Sustainability Rating: Above Average; www.cisco.com) makes hardware and software that links and manages computer networks.

The company paid its first quarterly dividend of $0.06 a share in March 2011. Since then, it has increased that payout eight times. The current quarterly dividend of $0.33 offers an annualized yield of 2.8%.

Cisco continues to face strong competition from cheaper generic routers and switches. In response, it has shifted into faster-growing markets such as computer security systems and software. It’s also selling some of its legacy operations.

Due to those transactions, the company’s revenue rose 4.5%, from $47.1 billion in 2014 to $49.2 billion in 2016 (fiscal years end July 31). Revenue dipped to $48.0 billion in 2017, but rebounded to $49.3 billion in 2018.

If you exclude unusual items, Cisco’s overall earnings gained 16.9%, from $10.9 billion in 2014 to $12.7 billion in 2018. Due to fewer shares outstanding, earnings per share rose at the faster rate of 26.2%, from $2.06 to $2.60.

The company recently paid $2.35 billion for Duo Security Inc. For its clients, the privately held firm makes software that uses a two-step process to verify a person identity before connecting them to the client’s cloud-based system. Duo’s software also scans devices for out-of-date software that could corrupt a network.

In its fiscal 2019 first quarter, ended October 27, 2018, Cisco’s earnings rose 13.7%, to $3.45 billion from $3.04 billion a year earlier. During the quarter, the company spent $5.0 billion on share repurchases; as a result, earnings per share jumped 23.0%, to $0.75 from $0.61, on fewer shares outstanding. Revenue improved 7.7%, to $13.07 billion from $12.14 billion.

Cisco continues to benefit as more of its corporate customers shift their computing platforms to the cloud (remote servers that users access over the Internet). That has spurred demand for its networking gear and security software.

In response to new U.S. tariffs on goods made in China, Cisco plans to shift some of its manufacturing to Mexico and other countries. It should also have little trouble passing along the higher costs to its customers.

In addition to acquisitions, the company continues to develop its own products. It spent $1.61 billion (or a high 12.3% of its revenue) on research. That’s up 2.6% from $1.57 billion (or 12.9%) a year earlier.

Cisco’s strong balance sheet will continue to let it keep expanding. As of October 27, 2018, it held cash and investments of $42.6 billion, or $9.43 a share. Its long-term debt of $18.3 billion is a low 9% of its market cap.

Due to its recent acquisitions, the company’s goodwill (how much it paid for its acquisitions less the value of their tangible assets) is now $33.4 billion. That’s a high 16% of Cisco’s market cap. However, the company cuts the risk of a big writedown for that goodwill by targeting smaller firms.

The stock has gained 25% in the past year. Even so, it trades at a moderate 15.4 times the company’s projected 2019 earnings of $3.05 a share.

Cisco Systems is a buy.