Juniper Networks: A Must-See Dividend Growth Stock (NYSE:JNPR)

Daniel Grizel

Some industries have oligopolies, like UPS (UPS) and FedEx (FDX), in which both companies are formidable players with a large market share. There are other industries that are led by a dominant firm followed by a “second banana” somehow.

This was the case for many years with Intel (INTC) and Advanced Micro Devices (AMD), the latter having been written off by the investment community for many, many years before AMD started to shine a few years ago.

This brings me to the networking industry, which is led by Cisco (CSCO), a dominant market force, and Juniper Networks (NYSE: JNPR) who played second fiddle for many years. While I don’t see JNPR disrupting the networking of what AMD has done for semiconductors anytime soon, I do think it currently offers attractive value for dividend growth investors, so let’s get started.

Why JNPR?

Juniper Networks is a global networking products and services company that connects the way people work and live. It delivers a high-performance network infrastructure that creates opportunities for service providers, enterprises, and governments around the world. The company operates in service provider routing, enterprise routing and security, and development and services, and over the past 12 months generated total revenue of $4.9 billion. of dollars.

Unlike Cisco, which saw steady year-over-year revenue growth in its last quarter (Q3 FY22), Juniper is growing nicely, with 8% year-over-year revenue growth to $1.27 billion. in the second trimester. This was driven by healthy demand signals as the company continues to attract customers to its enterprise, cloud and service provider markets with an all-time high backlog.

This gives Juniper a strong revenue outlook as it ramps up customer orders, and is reflected in the sequential revenue growth of 6.3% to $1.35 billion that management has scheduled for the third quarter. Also encouraging, Juniper is reporting higher profitability, with an operating margin growing 120 basis points on an annual basis to 8.5%.

Juniper’s future looks bright as it has the scale to capitalize on the megatrend of helping customers move to secure and automated multi-cloud and AI-enabled environments, as well as global transition to 5G.

This is reflected in its strong momentum in the service provider segment, with a recent 400GB core win with one of the US Tier 1 carriers. Additionally, Juniper is also making progress in major metropolitan markets where it has recently introduced several new platforms to strengthen its competitive position there. Management also highlighted its cloud/AI dynamic during the recent conference call:

Customer interest in our cloud-ready data center portfolio remains high and given the gains we have already made, I am optimistic that we will be able to capitalize on the attractive growth of this market over the next few years. . Revenue from our AI-focused businesses continued to significantly outpace the market, growing 17% year-over-year. This strength was led by our Mist-ified portfolio, which grew more than 60% year-over-year, delivering another record quarter for Mist Wi-Fi and Mist-ified revenue.

We are particularly encouraged by the traction we are seeing with major customers around the world with wins at a global financial bank, a global automaker and a global furniture retailer, each of which recently purchased a combination of wireless devices , wired and driven by AI. , security and/or SD WAN products from Juniper.

To capitalize on this AI-driven business momentum, we continue to deliver groundbreaking new products that optimize both end-user and operator experiences, such as a recently launched EX4100 family of access switches. Like the EX4400 family announced last year, these are true born-in-the-cloud enterprise-grade access switches with native AIOps ensuring easy setup and management combined with class-leading scalability, security, and performance.

Meanwhile, Juniper maintains a strong BBB-rated balance sheet. It also pays a well-covered dividend yield of 3% with a payout ratio of 47%. Juniper has also been an impressive dividend producer with a 5-year dividend CAGR of 15.4%.

At the current price of $28.11, the stock is trading at a reasonable forward PE of 15.2. This looks attractive given its tailwinds and analysts’ expectation of 12-20% annual EPS growth over the next 2 years. Analysts on the sell side have an average price target of $33.28, which translates to a potential total return of 18% over one year, including dividends.

Key takeaway for investors

Juniper Networks is enjoying tailwinds in the form of the transition to 5G, cloud computing and AI. It demonstrates healthy revenue growth and this should continue as it progresses through the record backlog. It also has a strong balance sheet and pays a well-covered and growing dividend. Juniper currently looks attractive to dividend growth investors for potentially strong long-term returns.

About Jimmie T.

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