Technology

Beyond Election Results: 5 Top Tech Dividends That Will Deliver in 2017

Lee Jackson

Published: November 8, 2016 8:20 am

Last Updated: January 13, 2020 1:21 am

It seems as though the election cycle has gone on forever, because it has, and today finally the election will be held. While both sides feel their candidate will be the best, we probably end up with a divided Washington, which usually means gridlock, and given the past eight years, they may not be all that bad.

We get the sense the various Wall Street strategists we cover think that the best way for investors to be situated in 2017 is in very large cap stocks that pay solid dividends. We screened our 24/7 Wall St. research database and found that many analyst remain bullish on mega-cap dividend paying technology stocks. These five, all are rated Buy, could continue to thrive in 2017.

Applied Materials

This semiconductor capital equipment leader has moved up nicely this year after underperforming. Applied Materials Inc. (NASDAQ: AMAT) 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 analysts are very positive on the stock and see Applied Materials benefiting not only the semiconductor side of the business, but also from larger, higher resolution and flexible screens on the display side of the business. Despite reporting solid first-quarter earnings that were above consensus, and guidance that was in line with expectations, the stock is still very reasonably priced. It may very well be one of the best technology values available for investors today. Some Wall Street analysts see continued FinFET capacity expansion (10nm/14nm/16nm) and transition to 3D NAND, with DRAM spending remaining strong next year.

Earlier this year the company announced a new $2 billion share buyback program, which comes on the heels of a recently completed $3 billion program. Merrill Lynch sees the purchase plan as being approximately 8% accretive to earnings.

Shareholders receive a 1.4% dividend. The Merrill Lynch price target for the stock is $35. The Wall Street consensus target is $33.50. Shares closed Monday at $29.66.

Cisco

This is one of the top mega-cap technology stock picks on Wall Street. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide. It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.

Cisco offers service provider video infrastructure, including set-top boxes, cable/telecommunications access products, and cable modems, as well as video software and solutions. In addition, it provides collaboration products comprising unified communications products, conferencing products, telepresence systems and enterprise mobile messaging products; data center products, such as blade, rack and modular servers, fabric interconnects, software and server access virtualization solutions; security products, including network and data center security, advanced threat protection, web and email security, access and policy, unified threat management, and advisory, integration, and managed services; and other products, such as emerging technologies and other networking products.

UBS analysts recently met with the company CFO, Kelly Kramer, who came over from General Electric. They noted these positives in a recent report:

Interesting tidbits from our discussion included (1) Ms. Kramer said Cisco has no interest in buying Nokia and played down the likelihood of a large acquisition, (2) there is a good chance for repatriation legislation in 2018; Kramer would like to do more than offset dilution with the buyback program, (3) Cisco is co-developing a router with one of the hyperscalers—Cisco owns the IP and it will become a core router offering, and (4) each business unit is examining how to “Meraki-ize” in order to create more recurring revenue though the shift will be gradual.

The last part refers to Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate.

Cisco investors receive a 3.36% dividend. UBS has a $35 price target, and the consensus target is $33.30. Shares closed yesterday at $30.94.

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 reported third-quarter growth in sales, but data center sales came in below expectations for the tech giant and clouded otherwise overall solid growth. A new partnership with Microsoft for virtual reality and a consistent shift away for reliance on chips for personal computers keep the stock a compelling buy. A stunning 82.4% of Intel sales come from overseas, the lion’s share of it in Asia, where the chips that it produces are used in personal computers, tablets and other personal electronic devices.

Intel investors receive a 3% dividend. The $42 Merrill Lynch price target is higher than the consensus target of $40.19. Shares closed Monday at $34.69.

Microsoft

This top old-school technology stock gives investors a degree of mega-cap tech safety and has a massive $105 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.

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. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users.

The 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 not likely to snag the top slot from Amazon, it could add huge incremental revenue for years to come, especially when you factor in the huge revenue potential from the banks, insurance companies and the financial services industry.

The company announced in mid-summer a gigantic all-cash, $196 per share offer for LinkedIn. While some on Wall Street gasped at the huge premium paid, Microsoft continues to expand its product lines and cut its dependence on software sales. While it remains to be seen how the fit will be, the analysts like the overall product synergies the deal brings.

Microsoft investors receive a 2.58% dividend, and the forward valuation remains compelling. The Merrill Lynch price target is at $68. The consensus target is $63.81. Shares closed Monday at $60.42.

Qualcomm

This top technology stock has done very well this year. Qualcomm Inc. (NASDAQ: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. The company includes the licensing business, QTL, and the vast majority of its patent portfolio. Its subsidiary Qualcomm Technologies operates substantially all of Qualcomm’s engineering, research and development functions, as well as substantially all of its products and services businesses, including its semiconductor business, QCT.

The growth of 3G mobile technologies in emerging markets, like China and India, has had a positive impact on Qualcomm and could be a difference maker going forward. Qualcomm is and has been for years a market leader in the development of 3G CDMA (Code Division Multiple Access) technologies. The company recently developed an LTE chipset that supports SCDMA (Synchronous Code Division Multiple Access) technology. China’s mobile network runs on this, and it could provide the company with a huge leg up in years to come.

Qualcomm reported third-quarter revenue and earnings that beat Wall Street estimates. Fourth-quarter guidance was also better than expected. In China, new semiconductor products are gaining share and management is making better progress with royalty collections.

The analysts are bullish on the company’s acquisition of NXP Semiconductors, which Qualcomm is buying in an all-cash deal at $110 per share. The deal is expected to close at the end of 2017 and should be immediately accretive to earnings. The merger brings together complementary products for mobile, automotive, Internet of Things and networking applications.

Investors are paid a 3.22% dividend. The Merrill Lynch price objective is $76, while the consensus target is $73.10. Shares closed Monday at $68.46.

While the road after the election could be rocky, it looks as though stocks will remain the best avenue for investors in 2017 as rates will stay low. While everybody should be prepared for a rate hike next month, and again twice next year, they will be small and are way overdue anyway.