Investors are always on the hunt for dividend stocks, but we don’t always find the best yields and payouts in the tech space. However, as we try to navigate a bear market in a tumultuous year, investors are looking harder than ever for some safe bargains. With that, are there any tech stocks with dividends that we should pay attention to?
I think that there are, for the right investor. Unfortunately, many of the tech companies with higher yields are also accompanied by lower growth. On the flip side though, they also tend to have lower valuations, which is attractive in a difficult time like this.
For investors who have more of a growth mindset, there will be a few stocks on this list that aren’t all that attractive. However, for those who are looking more for income at this point, here are a few tech stocks with dividends to focus on.
Tech Stocks With Dividends
Broadcom (AVGO)
I have been writing about Broadcom (NASDAQ:AVGO) a lot lately, and I became aware of it when I was looking for undervalued semiconductor stocks. However, I have been writing about this name for a good reason.
First, it most certainly belongs on our list of tech stocks with dividends, given its 3.4% yield. For most tech companies outside of this list, that’s a tough dividend to maintain. Further, the company has a five-year average growth rate of 32% for its dividend, a payout ratio below 50% and it has grown its dividend for ten years straight.
Not only that, but it’s a cash-flow machine. Broadcom has trailing free cash flow of more than $15 billion.
Trading at just 12.5 times its earnings, the shares are hardly expensive. But analysts on average, expect it to post about 21% revenue growth this year and 6% growth in 2023. That’s alongside 33% growth this year and almost 9% growth next year.
Everyone should be looking to scoop up BRCM stock on a nasty, panicky selloff.
Texas Instruments (TXN)
Following up with another pick in the semiconductor space, we have Texas Instruments (NASDAQ:TXN) and its 3% dividend yield. The payout is not as robust as Broadcom’s, but it’s still worthy of being on our list of tech stocks with dividends.
The stock is a little pricier too, at about 17 times analysts’ mean 2022 earnings estimate. However, when you look across the semiconductor space, this name has held up much better than the rest.
Shares are down “just” 16% from their three-year high. That’s vastly better than Broadcom’s 28% decline, but it’s a better showing than those of the S&P 500, Nasdaq, Dow, FAANG, Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD) and the VanEck Semiconductor ETF (NASDAQ:SMH).
So for those who are unmoved by Texas Instruments’ 10% revenue growth and 15% earnings growth or criticize its “higher valuation,” keep the stock’s performance in mind.
Dell (DELL)
Dell (NYSE:DELL) isn’t a name that pops up on too many lists, but it hasn’t been around as a public company all that long. Or at least it has not been present in its most recent form.
The company went public in 1988 and was then taken private in 2013 by Michael Dell. He took Dell private “to allow it to focus more on its long-term strategy without having to be pressured by the short term growth, profitability, and equity analysts’ focus on quarterly earnings.”
While Dell has managed to turn things around a bit, it’s still a bit growth-starved. Yet investors are loving the 3.5% dividend yield and the fact that the shares trade at just 5.5 times this year’s earnings.
That’s not a typo; DELL stock is changing hands for just 5.5 times analysts’ average 2022 earnings estimate for the company. Those earnings are forecast to grow 9% this year despite analysts, on average, expecting just 1% revenue growth. In 2023, analysts’ mean estimate calls for almost 5% earnings growth despite a 1% dip in its sales.
Oracle (ORCL)
Oracle (NASDAQ:ORCL) has the lowest dividend yield of any stock on this list, paying out just 2%. However, the company is one that investors shouldn’t ignore.
The shares trade at a rather modest 13 times this year’s mean earnings estimate . Analysts, on average, expect 16.5% revenue growth this year, but roughly flat earnings growth.
According to one analyst, “Oracle’s strong [first-quarter] results and [second-quarter and full-year] guidance commentary reinforce our view that Oracle is well positioned to emerge as the [third or fourth] vendor in the [platform-as-a-service/infrastructure-as-a-service] market and as the [second] vendor in the [software-as-a-service] market—enabling the company to continue to reaccelerate revenue growth into the double digits.”
It’s nice to see this “old tech” company growing its top line, but it’s not great to see that its bottom line is expected to be flat. That said, next year’s expectations call for more modest revenue growth of 6.7%, but that’s alongside 14% earnings growth. Of course, the average 2023 bottom-line estimate is much better than this year’s mean EPS outlook.
With a payout ratio of just 26%, Oracle clearly has room to continue raising its dividend. Further, it has grown its dividend for seven straight years, so clearly the firm is focused on its payout.
International Business Machines (IBM)
You’re going to struggle to believe it, but Big Blue made the list. International Business Machines (NYSE:IBM) stock pays out a hefty 5.25% dividend yield, the highest yield on this list. But that’s not the only thing that makes this stock attractive.
The shares trade at just 13 times this year’s average earnings forecast. IBM has always been a cheap stock. But generally there has been a good reason for that: The company never delivered significant growth.
However, that’s no longer the case.
Analysts expect modest revenue growth this year, calling for its sales to grow 4.6%. In 2023, estimates are a bit lower, coming in at an average of 2.8%. However, the average earnings estimates are much more robust, calling for 17.3% growth in 2022 and 8.5% growth in 2023.
Those mean estimates indicate that the company’s margins are expanding, while its forward P/E ratio will decline. Either way, it’s currently performing much better than it has in the pas. Also, let’s not forget that IBM is the best-performing stock on this list, as it’s down just 8.5% so far in 2022.
— Brett Kenwell
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Source: Investor Place