Technology

4 Merrill Lynch Buy-Rated Dividend Tech Stocks With Yields Up to Nearly 6%

Lee Jackson

Published: April 3, 2020 6:53 am

If any sector is poised to roar back when the current coronavirus worries are in the rear-view mirror, it’s technology, and with good reason. The sector is led by American companies and ingenuity, and in an ironic twist, it has been technology that has helped both Americans and American business stay in the game as shelter-in-place regulations have moved many to home offices or remote locations.

Looking for investment opportunities in the technology sector makes sense now for more aggressive accounts. One way to temper the risk is to look for established companies that also pay dividends. We screened the Merrill Lynch technology universe for stocks rated Buy that also pay dependable quarterly dividends. We found four that look like solid additions for aggressive growth accounts looking for a total return angle now.

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Broadcom

This stock has rallied smartly off the lows and offers big upside potential. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.

Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

Top Wall Street analysts like Broadcom’s leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand on the horizon, despite the current slowdown. While the balance of 2020 is a jump ball, 2021 looks very promising.

Investors receive a 5.48% dividend. Merrill has a $305 price target on the shares, and the Wall Street consensus target is $291. Broadcom stock closed Thursday at $237.06, up just over 6% on the day.

Corning

This company continues to be a huge player in the fiber optic world. Corning Inc. (NYSE: GLW) is a technology pioneer that manufactures LCD glass for flat-panel displays for multiple product lines.

Telecommunications (30% of sales) produces optical fiber and cable, component hardware and equipment, and photonic components for the telecommunications, CATV and networking industry. In addition, the company’s Environmental Technologies division (12% of sales) produces specialized glass, glass ceramic and polymer-based products for the automotive industry. The future remains solid for this diversified digital world leader.

Shareholders receive a 4.71% dividend. Merrill has a $34 price target, while the consensus target is $26.82. Corning stock was last seen trading at $18.70 per share.

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This blue chip giant offers investors a very solid entry point, after posting the best quarter for earnings in years in January. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.

IBM’s five major segments are: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. Analysts cite the company’s potential in the public cloud as a reason for their positive outlook going forward. But note that IBM is among the big corporations with the most debt.

CEO Ginni Rommety, who had been in the position since 2012, stepped down in January and the stock market greeted the news in a very positive manner at the time. Arvind Krishna, who has led the company’s cloud computing business, was named the new chief executive. Rometty will remain as executive chair of the board until the end of the year.

Shareholders receive a 5.9% dividend. The $170 Merrill price target is well above the $138.56 consensus figure. The final IBM stock trade on Thursday came in at $110.00.

Western Digital

This is a leader in the total addressable hard disk drive (HDD) market. Western Digital Corp. (NASDAQ: WDC) designs, manufactures and markets hard disk drives for use in enterprise storage, servers, desktop and laptop computers and consumer electronic devices. It also has a growing solid-state drive and storage systems portfolio and is currently the third-largest enterprise solid-state drive manufacturer.

The company sells its products directly to original equipment manufacturers, as well as distributors and retailers, and its production capabilities are vertically integrated.

The company announced in early March that David Goeckeler would become new CEO. The former CEO, Steve Milligan, remains in an advisory role until September. Goeckeler has experience running a large business ($34 billion Cisco Systems Networking and Security division) and has a good track record. He has experience with both Enterprise and Cloud customers, and he has run large semiconductor development projects.

Shareholders receive a 5.21% dividend. The Merrill price target is set at $75. The consensus target is $70.99, and Western Digital stock closed most recently at $38.40.

These four stocks have solid upside to the Merrill price targets and also offer investors perhaps a much more comfortable entry point than many of the tech momentum plays. There is a good chance the market will stay very volatile, and these could be good vehicles for a continued sideways to downwards move. For investors with longer time horizons that are looking to the sector, these dividend-paying giants all make sense now.