The broad line sector of the semiconductor industry boasts some of the top board and chip makers within the industry. That being said, these five companies also provide shareholders with good growth potential as they pay annual dividends between 3.3% and 6.7%.
Intel (INTC) - Founded in 1968 and based in Santa Clara, California, INTC currently trades at a P/E ratio of 11.04 and yields 3.3% ($0.84) making the stock very inexpensive when compared to several of its fellow Dow components. Analysts expect INTC to earn $0.53/share on revenue of $13.62 billion dollars for the second quarter and $2.50/share on revenue of $57.14 billion dollars for the year.
Over the last 5 years the company has raised its dividend an average of 13% per year and surpassed analysts' expectations in each of the last six quarters. The company currently carries a forward P/E ratio of 9.5 which is much less than its five year average of 15.4. Investors looking to establish a stake in INTC should do so but purchasing medium sized position so they can monetize both the growth and dividend the company has to offer investors.
Maxim Integrated Products (MXIM) - Founded in 1983 and based in Sunnyvale, California, MXIM currently trades at a P/E ratio of 19.36 and yields 3.4% ($0.88) making the stock cheap by most standards. Analysts expect MXIM to earn $0.39/share on revenue of $606.12 million dollars for the second quarter and $1.51/share on revenue of $2.4 billion dollars for the year.
During the first quarter MXIM beat street estimates by $0.06/share and noted that growth in the Asian marketplace, especially the mobile sector, continues to show positive results. Even though overall revenue was down 5.9% year over year, the numbers came in-line within the company's guidance of $555 million to $585 million dollars. Investors looking to establish a position in MXIM should pay close attention to how the overall semiconductor industry is fairing in both Europe and Asia. I'd begin by establishing a small position and add to that position as both earnings and dividend dates approach. I'd reduce my position if the markets in both Europe and Asia experience a slowdown which directly affects the production and sale of semiconductors.
Analog Devices (ADI) - Founded in 1965 and based in Norwood, Massachusetts, ADI currently trades at a P/E ratio of 16.04 and yields 3.3% ($1.20) making the stock very inexpensive by most standards. Analysts expect ADI to earn $0.57/share on revenue of $693.2 million dollars for the second quarter and $2.17/share on revenue of $2.74 billion dollars for the year.
For a company with a market cap of just over $11 billion dollars and an EPS growth rate of just over 20%, ADI will certainly enhance any portfolio, even though they've warned about Q3 revenues. With about one-fifth of its revenues coming from China, ADI has a very nice presence in the Asian region. Investors looking to initiate a position in ADI should do so in moderation and if a downturn in China occurs, a better buying opportunity in ADI could emerge.
Cypress Semiconductor (CY) - Founded in 1982 and based in San Jose, California, CY currently trades at a P/E ratio of 25.4 and yields 3.3% ($0.44) making the stock relatively inexpensive by most standards. Analysts expect CY to earn $0.18/share on revenue of $204.13 million dollars for the second quarter and $0.88/share on revenue of $860.67 million dollars for the year.
Carrying an Analysts' Rating of 2.2 and an estimated 1-year EPS growth rate of 45.45%, CY has a lot to offer potential investors. Trading at the lower end of its 52-week range and recently increasing its dividend from $0.09/share to $0.11/share CY is heading in the right direction. Over the last four quarters CY has surpassed analysts' estimates by an average of 13.28%, which is pretty impressive for any stock. Investors looking to establish a position in CY should do so in a favorable way, keeping in mind both the latest dividend increase and positive EPS growth.
ST Microelectronics NV (STM) - Founded in 1987 and based in Geneva, Switzerland, STM currently trades at a P/E ratio of 15.41 and yields 6.7% ($0.34) making the stock affordable by most standards. Analysts expect STM to post a loss of $0.01/share on revenue of $2.17 billion dollars for the second quarter and $0.20/share on revenue of $9.07 billion dollars for the year.
With a market cap of just over $4.5 billion dollars, STM has some very nice growth prospects, even though the investment carries some significant risk. First, the company currently yields 6.7% ($0.34), and for a stock trading at about $5.25/share, that's not too shabby. EPS has been weak over the last four quarters however a strategic partnership with ST-Ericsson that should enhance future earnings.
According to CEO Carlo Bozotti, and detailed on the company's most recent conference call, the partnerships main strategy is "to sustain a measurable progress in reducing the quarterly operating losses at ST-Ericsson in the second half of this year, leading to a significant reduction in losses as we exit the year". The direction STM is heading sounds very promising, and if they can successfully execute the ST-Ericsson partnership EPS growth may be able to sustain profitability for a prolonged period of time.
Investors looking to establish a position in STM should do cautiously. I'd begin with a small to moderate position and work from there. If STM can turn a profit in the second, then and only then would I increase my position.