The fears of a European debt crisis and a possible disorderly Greek exit from the eurozone has caused a sizable market correction. This recent wave of risk-off selling pressure has brought down a number of solid stocks in the tech sector. In particular, it makes sense to consider tech companies that offer dividends and a valuation that is compellingly cheap. Since the markets are volatile and many investors are running scared, it is an opportunity to buy cheap now. Value stocks and dividend stocks have historically held up better in market corrections and these stocks offer both:
Intel Corporation (INTC) shares were hitting new 52-week highs just a few weeks ago, and the company has been reporting solid financial results. Intel announced first quarter 2012 revenues of $12.9 billion, operating income of $3.8 billion, net income of $2.7 billion and 53 cents per share in net earnings. In spite of the recent good news, the stock has pulled back to attractive levels for longer term investors. While some investors think Intel has been slow to target chips for smartphones and tablets, the company seems to be serious about this market and it is introducing new designs that will focus on capturing the fast growth in this sector. Intel has a fortress-like balance with over $7 billion in cash, it has growth prospects with new chip designs and from emerging market countries which continue to see demand for PC's, and it offers an above-average dividend. One analyst believes Intel could trade for $40 per share in the next two years, and this would give investors buying now gains of about 70%, plus a dividend yielding over 3%, while you wait.
Here are some key points for INTC:
- Current share price: $25.74
- The 52 week range is $19.16 to $29.27
- Earnings estimates for 2012: $2.50 per share
- Earnings estimates for 2013: $2.69 per share
- Annual dividend: 84 cents per share which yields 3.3%
Corning Inc., (GLW) shares surged to about $14.40 after the company reported better than expected results, but the stock has given way to selling pressure from the market correction, and the shares look more attractive now at less than $13. For the first quarter of 2012, Corning announced a 2% increase in sales at $1.9 billion, and earnings of 30 cents per share. The company makes "Gorilla Glass" which is used by many smart phone and tablet makers including the ever-popular iPhone and iPad. This product which is part of Corning's specialty glass division is seeing strong growth at about 13% year over year. That rate of growth could increase when Corning launches "Gorilla Glass 2", which offers improved strength while using thinner glass. The company has seen weaker profit margins and growth in the LCD glass market, but that might be nearing the bottom of the cycle. Corning offers a solid dividend that was increased early this year and it now yields 2.3%. The payout ratio for the dividend is below 30%, so it has plenty of room to be raised in the future. About 4 weeks ago, analysts at Stern Agee put a buy rating on the stock and set a $18 price target. That would give investors buying below $13 per share, a gain of about 65%.
Here are some key points for GLW:
- Current share price: $12.91
- The 52 week range is $11.51 to $20.29
- Earnings estimates for 2012: $1.36 per share
- Earnings estimates for 2013: $1.51 per share
- Annual dividend: 30 cents per share which yields 2.3%
Broadcom Corporation (BRCM) shares were trading around $39 in April, but now can be bought for close to $31. This stock is worth buying for a variety of reasons including the fact that Broadcom has a strong balance sheet with about $4.5 billion in cash, and only around $1.2 billion in debt. Broadcom reported solid results with revenues of about $1.827 billion and non-GAAP earnings of 65 cents per share for the first quarter of 2012. Since it makes specialized computer chips which are used by many leading tech companies for tablets and smart phones, it should continue to see solid growth. In fact, Apple, Inc. (AAPL) is a major customer and uses Broadcom chips some of its most popular products. With the payout ratio at just around 12%, the company could easily afford to raise the dividend in the future. In early May, analysts at both Mizuho and Barclays set a $45 price target for Broadcom shares. This would give investors buying at about $31 per share, a gain of almost 50%.
Here are some key points for BRCM:
- Current share price: $31.68
- The 52 week range is $27.59 to $39.66
- Earnings estimates for 2012: $2.96 per share
- Earnings estimates for 2013: $3.19 per share
- Annual dividend: 40 cents per share which yields 1.3%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.