Cisco vs. Home Depot: Which Dow Stock’s the Better Buy for Dividends and Defense?

Cisco (NADSAQ:CSCO) and Home Depot (NYSE:HD) are more traditional value stocks that investors may wish to punch their ticket to if there’s concern about the S&P 500’s valuation. Of course, AI and disruptive tech have hogged the headlines of late. But there’s still ample value in some of the older economy names, especially if you can score a reasonable admission price.

In this piece, we’ll look at a pair of lower-volatility dividend payers that act as a steady rock for the Dow Jones Industrial Average (DJIA) index. While these Dow stocks aren’t as growthy or talked about, they do look interesting for investors who value dividends and defense in this environment.

Cisco

Shares of the network and communications equipment maker Cisco have been really gravitating higher in the past year, now up more than 40%. Indeed, the dot-com bust darling is breaking out in a big-time way, with shares now at fresh multi-decade highs.

With the company pulling the curtain on a handful of intriguing AI products during Cisco Live, perhaps the long-forgotten tech firm may be a worthy pick-up for investors seeking to play AI from more of a value angle.

At the time of writing, the stock goes for 27.1 times trailing price-to-earnings (P/E) to go with a 2.5% dividend yield and a 0.88 beta (a tad less volatility than the S&P 500). While Cisco isn’t the most defensive dividend play in the world, it’s growth narrative, I think, has changed for the better in recent months. Despite the recent melt-up and heftier multiples, I still think the best days are ahead for the firm as it gears up for the next stages of the AI boom.

During Cisco Live, the company unveiled a range of innovations, including an AI Canvas workspace, its own AI agent, and hardware designed to support the next era of intensive AI applications. Deutsche Bank analyst Matt Niknam upgraded CSCO stock over its cheap valuation and ability to grow EPS in the high single digits. I think Niknam is right to be more upbeat on the stock, especially now that it’s ready to get more AI-ready.

Maybe Cisco is a stealthy AI play to scoop up before the dot-com peak is hit again? Time will tell. Either way, there’s no arguing that Cisco is moving towards new highs with far more fundamental support and a dirt-cheap multiple than 25 years ago!

Home Depot

Home Depot is one of the “bluer” blue chips on the Dow, but it’s easy to forget about it when the housing market is in a bit of a rough patch. With shares down 19% from all-time highs, the yield sits at 2.65% while the trailing P/E is hovering just shy of 24 times.

While Home Depot reaffirmed its full-year guide following a lukewarm first quarter, investors don’t seem to be in a rush to pick up the stock on weakness, especially amid growing economic uncertainties. In any case, analysts are staying upbeat on the Dow stock, praising the firm for its investments in tech and cutting-edge operating efficiencies.

One big-name analyst, Greg Melich of Evercore, thinks Home Depot could experience a “breakout multiple” of sorts. If a recession doesn’t materialize, I think Mr. Melich could be right on the money. The stock is dirt-cheap, and the firm has shown a willingness to offer price stability to customers at such an uncertain time. With such great managers running the show, I think Home Depot could be one of the more tariff-resilient plays in retail for the second half.

The bottom line

It’s tough to pick between the two stellar Dow dividend stocks, but if I had to pick one, it’d be Cisco. The stock is in breakout mode, and new AI offerings revealed at its latest event, I believe, could have the potential to propel earnings growth at a much faster pace than expected over the medium term.

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