About Time Tech Stocks Begin To Reward Investor’s Patience
Third quarter earnings season is heating up Wall Street. Investors and analysts are keeping a close eye on the upcoming earnings sessions of some of the biggest mega-cap technology companies, hoping that they will deliver better-than-expected returns against the backdrop of sticky market conditions.
Most investors are holding their breath, as the Magnificent Seven – Alphabet (NASDAQ: GOOGL); Amazon (NASDAQ: AMZN); Apple (NASDAQ: AAPL); Meta Platforms (NASDAQ: META); Microsoft (NASDAQ: MSFT); Nvidia (NASDAQ: NVDA); and Tesla (NASDAQ: TSLA) – are set to release their quarterly earnings in the coming weeks. These seven household names have added almost $4 trillion in market capitalization this year.
In total, these seven companies have added roughly 40 points to the MSCI Index, which has risen about 37 points overall.
During the second last trading week of October, the 10-year Treasury yield hit a 16-year high of 5% before dipping down again towards 4.83%. During the same time, the tech-heavy Nasdaq Composite dropped nearly 10% on the back of a shaky bond market, as investor sentiment shifted and economic expectations sank lower.
Now, as we step into the fourth quarter, and enter the tail-end of the year, many investors are bracing for yet another seemingly tumultuous period of economic uncertainty driven by eye-watering interest rates and geopolitical tension heating up in the Middle East and in Eastern Europe.
Tech Dividends In A Time Of Uncertainty
The seemingly never-ending challenging market conditions have driven investors to look at growth stock options that provide them with compounding returns, offering their portfolios some buoyancy despite living through meager trading sessions.
In a 2022 Hartford Funds report, analysts estimate that roughly 84% of the S&P 500 Index’s total returns between 1960 and 2021 flowed from reinvested dividends and the overall compounding of dividend returns.
Bearing in mind that investors keep dividend-paying tech companies’ fundamentals in mind when further diversifying their portfolios, over the long-term stretch, dividend tech stocks, especially those heavily investing in the development of Artificial Intelligence (AI) and Machine Learning (ML) could see some steady, and compelling returns as they navigate the stormy market.
Without giving preference, here are some of the most promising tech stocks rewarding investors’ patience.
Nvidia
It’s safe to say that Wall Street sweetheart and global chipmaker, Nvidia (NASDAQ: NVDA) have helped fuel investors’ lust and eagerness to jump back into the tech market after the sector experienced a seemingly disappointing start to the year.
Shares of Nvidia have soared this year, shooting through the glass ceiling, and rising over 200% to date. In late May, NVDA witnessed its biggest trading day, as shares jumped by more than 24% in a single day, after the company announced that it would expect second-quarter sales to hit more than $11 billion. Nvidia ended the quarter with more than $13.51 billion in total revenue for the quarter, which represented a more than 101% boost in year-over-year revenue growth.
When it comes to the race for innovation, Nvidia is challenging the narrative, however, for investors dividend performance remains within the bottom league compared to other tech stocks.
For its latest earnings, NVDA posted a quarterly dividend amount of roughly $0.040 per share, while holding an annual dividend yield of 0.037%. This is slightly disappointing, taking into consideration that NVDA currently has a year range high of $502.66 per share, with the low point being $120.64.
This isn’t to say that NVDA is a speculative investment, instead, it could provide seasoned professionals with more buoyancy in their portfolio. Perhaps the golden token here would be that NVDA is a long-term tech stock that can provide significant support for near-term downturns.
Cisco Systems
Investors seeking a more sustainable, and perhaps diverse technology option that will reward them with dividends, Cisco (NASDAQ: CSCO) has retained a positive investor sentiment in recent years, partially due to the company strategically adapting to the ever-changing technological marketplace.
For starters, the company has gone from providing telecommunication services nationally to operating hardware and software services to developing high-technology services now used for the Internet of Things (IoT), OpenDNS products, and domain security.
While other competitors might be sleeping on the boom in artificial intelligence, Cisco has managed to scoop up cybersecurity firm, Splunk (SPLK) in a $28 billion deal. This marks the company’s biggest-ever software deal, as it attempts to grow its AI business segment, and further capitalize on the industry.
Dividends have been somewhat promising, with the company reporting a 2.99% annual dividend yield, slightly better compared to the likes of Nvidia, and a quarterly dividend of 0.39%.
While there have been some slow, and perhaps steady times during the year, CSCO shares continue to hold off economic turbulence, with shares rising just over 8% year to date, and managing to regain their footing after experiencing a strong decline in mid-April. Shares have improved by 14.22% since reaching its lowest of $45.70 per share back in May.
Why Cisco? Well, why not? The company is clearly aligning its long-term business strategies to further capitalize on the booming AI industry. Even more, Cisco is a trusted tech brand that provides stability, and positive dividend returns for investors that take up a longer-term position.
Skyworks Solutions
The American multinational semiconductor company, Skyworks (NASDAQ: SWKS) is another dividend option for investors hoping to diversify their portfolios in the coming months.
Although Skyworks isn’t perhaps the first option when it comes to technology stocks, the acquisition of the infrastructure and automotive business, Silicon Labs back in 2021 for $2.75 billion has helped to significantly increase the company’s digital footprint.
One would think that Skyworks would be taking advantage of the bustling electric vehicle (EV) market that has experienced quarter-over-quarter growth, both in the United States and in other leading regions, including Europe and China. However, this isn’t necessarily the sentiment of Skyworks, as the company solely manufactures semiconductors for mobile communication systems and radio frequency.
Based on recent quarterly financial earnings, SWKS provided investors with a significant upside, as the company increased its quarterly dividend by 10% to $0.68 per share.
For the fiscal third quarter, the company posted roughly $1.07 billion in revenue, and over $230.7 million in operating income, which translates into $1.22 earnings per diluted share. On the other hand, non-GAAP diluted earnings per share was $1.73 per share for the same recorded quarter.
SWKS has managed to remain buoyant for much of the year, however, more recently, share performance has started sliding, and is now nearing the low price margin last witnessed in January 2023. Prices have been zig-zagging across the market, and on a year-to-date basis, overall SWKS has declined about 0.044%.
Looking at its dividend yield, SWKS currently sits on a 3.01% annual dividend yield, which is not bad considering the meager performance of stocks throughout the last stretch of the year. Based on current performance, quarterly dividends are roughly $0.68 per share, however, many are hopeful that the company could keep at this pace, or further raise their dividends in the next earnings quarter.
To be honest, SWKS could provide investors with a significant upside, especially if they are looking for a low-hanging tech stock that provides attractive dividends. However, SWKS could potentially pose long-term risks, but this could be purely speculative.
International Business Machines
Better known as IBM (NYSE: IBM) it has kept investors relatively bullish throughout much of the current third-quarter earnings season. Some analysts currently estimate that the company, International Business Machines could report an earnings per share (EPS) of roughly $2.01.
Similarly, the company managed to beat analyst’s estimates last quarter by $0.17 per share, which represented a 2.14% increase in IBM share prices following the announcement.
This quarter has kept investors bullish over the forward-looking guidance of IBM, as share performance managed to reach a peak within the current quarterly period, before sliding again.
On the year-to-date spectrum, share performance is down by 2.66%, however, prices are still somewhat 2.60% higher compared to January when the company announced that it will start reducing headcount as part of its restructuring strategy to stabilize its bottom line.
IBM has gone from being a household name in the computer sector, to developing more advanced and efficient software systems that are now used globally. The company has a dynamic portfolio, branching into various computing, information technology (IT) and software sub-sectors.
On the dividend side, IBM currently provides investors with a healthy 4.82% annual dividend yield, and roughly $1.66 per share quarterly dividend amount.
Although investors, and perhaps more importantly, – novice professionals – are incredibly bullish over specialty tech companies and mega-cap tech stocks, IBM is a long and trusted household brand that provides stability, and trading consistency for investors who understand their long-term strategy.
Hewlett-Packard
Another household name in the IT sector, Hewlett-Packard (NYSE: HPQ) has left many investors eager to see what the company has in store for its upcoming third-quarter financial earnings.
For starters, the company has said that it sees a 2% to 4% increase in long-term annual revenue growth. At the same time, the company is further looking to grow its earnings per share within the single-digit percentage range according to a report by Barrons.
Secondly, analysts estimate that the company currently has a 36% Return On Employed (ROCE), taking into consideration that HP reported $4.2 billion in Earnings Before Interest and Tax in the previous quarter.
This estimate is substantially positive, and more than double compared to the tech industry average, which is closer to 13%.
HP currently offers investors a 4.10% annual dividend, which is quite attractive seeing that shares are currently trading at a day range of $25.93 – $26.25 per share.
Looking at past performance, HP stocks have dealt with some blows this year, however, despite the slowing economic environment, shares have since only declined 2.24% year to date.
For novice investors, who aren’t looking to commit to any big-tech stock options at the moment, HP provides significant near-term returns, and based on past performance, and forward-looking guidance by the company earlier in the quarter, they good further boost dividend yields.
Concluding Thoughts
While the tech sector started the year on a bumpy road, things are steadily starting to shape up once again, as many large-cap companies are redirecting their focus towards the development of artificial intelligence and autonomous systems. For those that are still playing a bit of catch-up, investors remain bullish over the long-term outlook, as many more tech-focused companies are hoping to benefit from the booming artificial technology market.
For investors, however, this presents a major upside, especially as we steadily enter into yet another difficult and perhaps challenging final quarter of the year. While talks of a possible recession are once again making its way to the discussion, it would be the time for investors to look for stocks that can provide their portfolios with a bit of buoyancy, but more importantly, cushion some of the hardest blows.
