Technology

Tech Is Red-Hot: 4 Stocks With Upside Potential and Big Dividends

Lee Jackson

Published: September 16, 2016 11:45 am

Last Updated: January 13, 2020 3:29 am

With the release of the very highly anticipated iPhone 7, technology, and especially Apple Inc. (NASDAQ: AAPL), is back in the spotlight, and with good reason.

Despite a stock market that is somewhat bloated and trading near historically high multiples, technology stocks, with the exception of certain sub-sectors like semiconductors, remain cheap for the most part. With the traditionally strong fourth quarter right around the corner, adding some tech to a long-term growth portfolio makes sense now.

We screened our 24/7 Wall St. research database for technology companies that also pay solid dividends. We also screened for companies rated Buy at a major firm. We found four that look very interesting now.

Ericsson

This top European tech and telecom company offers a solid dividend that continues to go higher. Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) provides network equipment and software, as well as services, for network and business operations worldwide.

Its Networks segment delivers products and solutions for mobile access, internet protocol (IP) and transmission networks, core networks and cloud. This segment offers radio access solutions; IP routing and transport solutions; microwave and optical transmission solutions for mobile and fixed networks; IP multimedia subsystem solutions; a cloud platform that handles workloads for various clouds; and telecom, IT and commercial cloud services.

The company’s Global Services segment delivers managed services, including services for designing, building, operating and managing the day-to-day operations of the customer’s network or solutions; maintenance services; network sharing solutions; shared solutions; and managed services of IT environments, as well as provides broadcast and media services.

Shareholders are paid a very nice 4.46% dividend. The JPMorgan price target for the stock is $8.60, and the Wall Street consensus price objective is $6.80. The shares were trading at $6.72 midday Friday.

Garmin

This stock fell out of the limelight and could be poised for a solid comeback. Garmin Ltd. (NASDAQ: GRMN) designs, develops, manufactures, markets and distributes a range of navigation, communication and information devices worldwide. It operates through five segments: Auto, Aviation, Marine, Outdoor, and Fitness. While the growth of smartphone GPS put a crimp in the company’s business, the expansion into new products is proving successful.

The company has no debt and boasts cash of over $1 billion, or $5.50 a share. There’s some frustration that it hasn’t been more aggressive in repurchasing shares, given its strong balance sheet. That could change if activists take aim at Garmin, which is chatter that has been heard on Wall Street for years.

Garmin investors receive an outstanding 4.8% dividend. While William Blair rates the stock a Buy, it has no target price posted. The consensus price objective is $46.60, and shares were trading above that level Friday at $47.11.

HP

This is the printer and personal computer businesses of the old Hewlett-Packard. HP Inc. (NYSE: HPQ) provides products, technologies, software, solutions and services to individual consumers and small- and medium-sized businesses, as well as to the government, health and education sectors worldwide.

The company’s Personal Systems segment offers commercial personal computers (PCs), consumer PCs, workstations, thin client PCs, tablets, retail point-of-sale systems, calculators and other related accessories, software, support and services for the commercial and consumer markets.

The Printing segment provides consumer and commercial printer hardware, supplies, media, scanning device and software and services, as well as LaserJet and enterprise, inkjet and printing, graphics, and software and web services.

HP investors are paid a very solid 3.4% dividend. The Merrill Lynch price target is $15, and the consensus estimate is set at $13.43. The stock was trading on Friday at $14.58 a share.

Seagate Technology

Though still down over 40% from the highs posted last year, the stock has rallied huge off the lows printed in May. Seagate Technology PLC (NASDAQ: STX) designs, manufactures and sells electronic data storage products in the Asia Pacific, the Americas and EMEA countries.

The company provides hard disk drives, solid state hybrid drives, solid state drives, PCIe cards and serial advanced technology architecture controllers that are designed for enterprise servers and storage systems in mission critical and nearline applications, as well as for client compute applications comprising desktop and mobile computing.

One of Wall Street’s biggest activist investors, ValueAct Capital, recently became one of Seagate’s largest shareholders with a new 9.5 million share stake. ValueAct established its new position via a secondary block trade, and will gain a seat at board meetings as an observer. ValueAct Capital generally invests in out-of-favor companies and works with them to make changes and boost long-term shareholder value.

Seagate investors are paid a huge 6.92% dividend, which many thought would be cut but has been held steady. Jefferies has a $38 price objective. The consensus target is $33.18, which is below the $36.35 seen midday Friday.

These stocks all have their detractors, but they have held their dividends and actually could prove to be solid contrarian buys. They are however, more suited for aggressive growth accounts.