It’s almost funny that technology stocks that have been around for years, and have been in and out of favor, are old enough to now be classified as “old school.” Funny or not, that’s indeed the case, and like all good companies, many of them are revamping and restructuring some of their business lines to compete with a host of new companies.

Solid results from one of the old schoolers late last week surprised the Wall Street pundits, and they were driven by some positive results in newer business lines. We decided to screen the Merrill Lynch technology research universe for old-school tech stocks rated Buy that also pay dividends. We found four that look pretty attractive now.

Applied Materials

This semiconductor capital equipment leader has lagged the overall tech market over the past year, but its shares have bounced smartly off lows printed in February and back in December. Applied Materials Inc. (NASDAQ: AMAT) is actually now finally trading above all the moving averages, and for patient investors may be a high-quality pick now.

The company is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Applied Material’s technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.

The company posted solid results last week that beat expectations and it raised guidance going forward. Merrill Lynch noted that the company’s core business improved from improving semiconductor capital equipment spending. The firm also cited an increase in organic light-emitting diode (OLED) adoption by companies like Apple as a positive.

Many on Wall Street think that films companies like Applied Materials will benefit from the new Intel and Micron Technology 3D XPoint (which is pronounced 3D cross-point) technology, which is an entirely new class of nonvolatile memory that can help turn immense amounts of data into valuable information in real time.

Applied Materials investors receive a 1.77% dividend. Merrill Lynch boosted its price target to $25. The Thomson/First Call consensus target is $25.28. Shares closed Friday at $22.66.

Intel

This leader in semiconductors is working hard to scale away from dependence on personal computers. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.

The company also provides communication and connectivity offerings, such as baseband processors, radio frequency transceivers and power management integrated circuits, and tablet, phone and Internet of Things solutions, which include multimode 4G LTE modems, Bluetooth technology and GPS receivers, software solutions and interoperability tests, as well as home gateway and set-top box components.

Intel announced a massive restructuring recently, which also included a large number of layoffs. The company is moving away from its slow-growth businesses and will be using the cash saved to expand its high-growth businesses of data center, Internet of Things and memory, all transformational revenue silos that the Merrill Lynch team is bullish on.

The company reported an inline first quarter, and lowered the forward outlook. Merrill Lynch stays positive on the company and believes there is solid upside potential for the stock. Some analysts think the restructuring can ultimately translate to 0.23 in annual earnings-per-share savings.

Investors receive a 3.44% dividend. Merrill Lynch has a $36 price target. The consensus target is $35.20. Shares closed on Friday at $30.15.
Microsoft

This top technology stock gives investors a degree of mega-cap tech safety, and it has a massive $99 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have been adding the software giant to their holdings at an increasingly faster pace all of this year.

Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Some analysts, Deutsche Bank included, maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. Keirstead believes that Amazon has zero interest in a race to the bottom with Azure in pricing.

Other top analysts believe the company continues to make steady progress with its cloud transition and expect Office 365 and Azure to be solid contributors to top and bottom line for the next several years. While unlikely to snag the top spot from Amazon, it could add huge incremental revenue for years to come.

With gaming revenues growing at a huge pace, the Xbox continues to gain more and more fans as the ultimate console to own. The company continues to upgrade the popular device, and many think that they could dominate Sony’s PlayStation at some point down the road.

Investors receive a 2.85% dividend, and the forward valuation remains compelling. The $65 Merrill Lynch price target is well above the consensus target of $57.65 and Friday’s close at $50.62.

Oracle

This top software stock has traded sideways since last summer and looks to be breaking out. Oracle Corp. (NYSE: ORCL) develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems and related services worldwide. It licenses its Oracle Database software to customers, which is designed to enable reliable and secure storage, retrieval and manipulation of various forms of data. Its Oracle Fusion Middleware software aims to build, deploy, secure, access and integrate business applications, as well as automate their business processes.

With shares trading at 15 times estimated 2016 earnings, and with a solid free cash flow yield, many analysts also feel that Oracle’s 12C database cycle starts to contribute during calendar 2016, and the stock could very well be poised for what they term a breakout year. After recent investors meetings, some analysts raised fiscal year 2017 cloud margins to 66% from 63% and earnings per share to $2.80. Some also believe that the software giant may be on the verge of a multiyear database product cycle.

The company reported solid first-quarter results, with license earnings below estimates but revenue from the cloud much higher. Some analysts feel fiscal 2016 will be a trough year for company in many ways, and they note that the maturing sales force and selling strategy is beginning to unlock pent-up cloud demand within the company’s sizable customer base.

Investors receive a 1.52% dividend. Merrill Lynch has $48 price target. The consensus price objective is $43.97. Shares closed Friday at $39.41.

With the odds that the summer adds some volatility to the mix, shifting to the old-school tech stocks may not be a bad idea. They all are well proven in tough markets, and will continue to crank out solid cash flow.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.