10 Old-School Tech Giants Offer Great Value and Dividends During the Trade War

Now that the “sell in May and go away” theme has given way to a stock market recovery in the first half of June, many investors are seeking safety net areas within the market. Some investors may be looking for utilities or consumer staples for safety and defense, but other investors are keeping their toes in the water in technology. It turns out that even if with a U.S.-China trade war brewing there are some technology stocks that already may have priced in much of the bad news that might be coming.

24/7 Wall St. has been screening many sectors for value and upside alike. Sometimes value and upside might offer conflicting views, and investors should understand that a broadening trade war and a continuing slower economy may pull all ships lower with the sinking tide.

Technology has changed over the years for investors. Many companies would now be considered “old school” by modern standards. These companies now pay solid dividends, have fairly predictable businesses, have long operating histories and are trading at a discount to the broader market.

Running a technology screen on Finviz reveals that 36 tech stocks in the S&P 500 are valued above $10 billion in market cap, pay dividends and still offer implied upside to the consensus analyst target price from Refinitiv. Within technology, we screened out companies that are really telecom companies, that are being targeted by the government or that are in potential game-changing lawsuits or antitrust cases.

24/7 Wall St. has identified 10 technology stocks from the S&P 500 that would be considered cheap on forward earnings multiples, come with upside to the consensus price targets and offer solid dividend yields. We have provided some trading data as well, and additional color, if there are issues to consider that may act as a drag on the shares. We have ranked these in order of their expected price-to-earnings ratios.

HP Inc. (NYSE: HPQ) was last seen trading near $20. It has a market cap of $30.1 billion and a 52-week trading range of $18.06 to $27.08. The consensus target price is $23.48, and HP is valued at 8.72 times expected earnings. The stock has a price to free cash flow ratio of 11.44.

HP, formerly Hewlett-Packard, may be hard to get excited about, selling personal computers in a world that many assume is now just all smartphones or Macs. Now that the company has broken out its enterprise and consumer businesses, the PC and printer giant offers a 3.2% dividend yield, and its shares have offered no real upside in 2019, with a loss of about 2% after is 2019 recovery was dashed with a big drop of about 15% at the end of February. The stock has been range-bound since and effectively is looking for its next big direction.

Seagate Technology PLC (NASDAQ: STX) was trading near $44, in a 52-week range of $35.38 to $59.93. It has a market cap of $12.2 billion and a consensus analyst target of $49.95. The stock is valued at 8.98 times expected earnings and 23.96 times free cash flow.

Seagate is a top storage and hard drive company that dates back to the late 1970s, and it has big swings up and down with earnings. Investors rarely want to pay up for a company that makes hard drives and storage devices. Some investors worry that a 5.7% dividend yield may be too high and is a red flag, but the company has plenty of cash and is less leveraged than others with huge debt burdens.

International Business Machines Corp. (NYSE: IBM) traded near $135, with a consensus target price of $147.06. It has changed hands in a 52-week range of $105.94 to $154.36. The market cap is $119.9 billion. The stock is valued at 9.52 times expected earnings and 18.01 times free cash flow.

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IBM is about as hated by tech investors as a company can get. That also sets it up as a contrarian’s dream for lurking upside. IBM is acquiring Red Hat to become a hypercloud leader. With efforts such as Watson, artificial intelligence and other critical initiatives, it hopes to replace its declining revenues from the old-school IT services the company has been known for decades as the leader. Just don’t look for any real growth for the time being, and the company is constantly pointed out as needing a new CEO (like about three or four years ago). This stock has tanked since its peak above $200 back in early 2013, and it has been so bad that even Warren Buffett threw in the towel here. Still, some analysts see value and a long-term turnaround actually working, and IBM pays a 4.8% dividend for its shareholders to wait while it tries to get its act back together.

Western Digital Corp. (NASDAQ: WDC) was trading around $36. It has a market cap of $10.6 billion and a 52-week range of $33.83 to $36.80. The consensus target price is $53.91, and the stock is valued at 9.58 times expected earnings. It has a price to free cash flow ratio of 14.78

Western Digital may be perceived as in the same boat as Seagate in storage and hard drives. It dates back to 1970, but the company leveraged up and acquired SanDisk for flash memory, and it comes with a 5.5% dividend yield that some investors may worry about, particularly as earnings are expected to decline. That said, the company has had many swings up and down, and its stock is down so far from its highs that value investors just might not be able to avoid the stock, even if they might be stepping into what could be a value trap.

Intel Corp. (NASDAQ: INTC) was last seen trading near $46, in a 52-week range of $42.36 to $59.59. It has a market cap of $209.2 billion and a consensus target price of $52.72. The stock is valued at 10.26 times expected earnings and 29.90 times free cash flow.

Intel is the king of processors for PCs, and even with the world’s continuing change the company has managed to stay relevant. Growth comes from servers and the Internet of Things, and that traditional processor business is a cash cow for Intel. With decades of leadership, Intel hardly needs much background and introduction data, now that revenue is running around $70 billion. Still, growth has petered out, even after having made acquisitions in recent years, and the Dow Jones industrial average component comes with a 2.7% dividend yield. It is one of the most shorted Dow stocks as well.

Broadcom Inc. (NASDAQ: AVGO) was trading above $278 but fell 8% to under $260 after earnings and guidance. It had a consensus target price of $316.61, but that target will be coming down. The 52-week range is $197.46 to $323.20, and the market cap is $110.4 billion. The stock is valued at 10.62 times expected earnings and 19.97 times free cash flow. Does a poor earnings report hurt for new value investors looking for bargains? No, not if they are looking at a long ball that will eventually get the China trade and overall semiconductor weakness out of the system.

Broadcom is now the blended company of Avago and the former Broadcom, and the company recently changed its model by acquiring CA Technologies for around $19 billion. The deal greatly changes the company, but it did just get a “working order” from Apple that the company actually was allowed to mention. With a relocation to the United States, it now also pays close to a 3.8% dividend yield. Analysts are still targeting revenue and earnings growth in the years ahead.

NetApp Inc. (NASDAQ: NTAP) traded around $62 on last look. It has a market cap of $15.3 billion and a 52-week trading range of $54.50 to $88.08. The consensus target price is $71.58. The stock is valued at 11.17 times expected earnings, and it has a price to free cash flow ratio of 16.99.

NetApp has been public since the mid-1990s and has migrated from a storage area network player into a leader for cloud computing. It has managed to grow revenues handily over time and is expected to keep seeing single-digit sales growth in the years ahead. It also comes with a 3% dividend yield, and the stock is still only valued about half of its peak value during the tech bubble of 2000.

Applied Materials Inc. (NASDAQ: AMAT) was trading around $41, in a 52-week range of $28.79 to $51.04. It has a market cap of $38.7 billion and a consensus analyst target of $52.25. The stock is valued at 11.27 times expected earnings and 19.35 times free cash flow.

Applied Materials is the leader when it comes to capital spending for semiconductors. Every generation of advances in chip building and chip evolution eventually goes through Applied Materials. It can see big ups and downs based on the chip cycles and the economy, but it has almost 40 years of history as a public company, and some investors might argue that it deserves a better earnings multiple and market cap considering its market leadership and growth. Still, revenues are expected to take a big hit this year, and next year’s recovery isn’t expected to be a high. It pays investors a 2% dividend yield, which can easily grow if it pays down some of its debt.

Lam Research Corp. (NASDAQ: LRCX) was trading at about $180, with a consensus target price of $222.00. It trades in a 52-week range of $122.64 to $209.50 and has a market cap of $27.0 billion. The stock is valued at 12.14 times expected earnings and 12.94 times free cash flow.

Lam Research has seen its share of volatility, and it has been public since the mid-1980s. Its shares may be down from the high, but it is still close to 10 times higher than at the bottom of the 2009 selling peak. Lam Research is also considered at risk with China, and analysts see a double-digit revenue slide back under $10 billion in 2019, with only a modest recovery in 2020. That said, Lam is paying close to a 2.5% dividend yield based on current prices.

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Corning Inc. (NYSE: GLW) traded near $31. It has a market cap of $24.5 billion and a 52-week range of $26.87 to $36.56. The consensus target price is $36.87. The stock is valued at 14.00 times expected earnings and has a price to free cash flow ratio of 12.59.

Corning is as old school as it comes, and it even used to be called “Glassworks” by traders and investors. The company is a leader in glass for TVs, monitors, smartphones, tablets and so on. Whatever you use for your computing, you probably have run across the company front and center without ever thinking about it. Corning always seems to command a low earnings multiple by all the Street, but it has grown and is expected to keep growing ahead. It also has room for upside to its 2.5% dividend yield, if it pays down some debt.