With all the volatility in the stock market, uncertainty in the global economy, and unresolved challenges with Europe's debt crisis, it makes sense to be very strategic about which stocks to invest in. Stocks
with weak fundamentals, poor balance sheets, little or no growth and no dividends could easily be crushed (and many already have been) in a market correction.
If you pick stocks that have "supporting factors" like a strong balance sheet and fundamentals, a solid dividend yield, and even strong support by Jim Cramer and other major investors and analysts, your chances of outperforming the market are much higher.
When markets drop and some investors are forced into selling (by margin calls) or by sheer desire to limit losses, the stocks that are most likely to be kept in the portfolio or even bought on dips will be dividend-payers, and companies with solid balance sheets and growth potential. The stocks below appear undervalued, pay a solid dividend, and are also favored by Jim Cramer.
It can pay to follow Cramer's stock picks because so many other investors do, and this can also be another supporting factor for a stock. Overall, investors should remain cautious and look to buy these Cramer dividend-paying tech favorites on "risk-off" days when stocks are on sale:
KLA-Tencor Corporation (NASDAQ:KLAC) shares are trading at bargain levels of about 10 times earnings, which is historically very low for a tech stock with growth potential. This company has been benefiting from the increased demand for mobile electronic devices. It has been reporting strong financial results and announced GAAP net income of $205 million or $1.21 in earnings per share for the third quarter of fiscal year 2012, which ended on March 31, 2012.
After the company announced the above-mentioned results, the stock popped up to about $55, but the shares have pulled back with the markets. However, this could be a solid buying opportunity to get in before the next quarterly earnings announcement, as the stock could be poised to rise from these levels. This company has a strong balance sheet with about $2.37 billion in cash and around $747 million in debt. With an above-average yield of 3% and solid fundamentals, this stock is worth buying on dips. Cramer thinks the stock will be a good play in the coming year.
Here are some key points for KLAC:
- Current share price: $46.06
- The 52 week range is $33.20 to $55.43
- Earnings estimates for 2012: $4.44
- Earnings estimates for 2013: $4.85
- Annual dividend: $1.40 per share which yields 3%
Cisco Systems, Inc. (NASDAQ:CSCO) shares have been holding up fairly well on days when the market is in sell-off mode. Recently, this maker of networking hardware has seen its stock drop to about $16, which seems to be a level of strong support and a good area to be a buyer. Cisco's CEO, John Chambers, took steps to transform this industry leader in the past year by restructuring the company through cost cutting, and layoffs in an attempt to boost profit margins. These moves seem to be slowly paying off.
Investors could continue to become more confident about the company and its management if earnings meet or beat expectations in the coming quarters. Now that the stock pays a dividend yield of nearly 2%, these shares are attractive for both income and growth investors. The company started to pay a dividend in 2011, with a 6 cent per quarter payout, but in 2012, it was raised to 8 cents per quarter.
Now that Cisco is a more mature tech company, it appears focused on rewarding shareholders with dividends and because the payout ratio is low, it has plenty of room to increase it in the future. I believe this company plans to raise the dividend annually. Cramer thinks Cisco shares are worth buying and he says "The networking business seems to be doing well...."
Here are some key points for CSCO:
- Current share price: $16.77
- The 52 week range is $13.30 to $21.30
- Earnings estimates for 2012: $1.84 per share
- Earnings estimates for 2013: $1.91 per share
- Annual dividend: 32 cents per share which yields 1.9%
Microchip Technology Incorporated (NASDAQ:MCHP) shares seemed to have bottomed out in early June, and have started to rebound slightly. This maker of semiconductor products has solid fundamentals, a generous dividend yielding about 4.3%, plus growth potential. Microchip has a strong balance sheet with about $1.46 billion in cash and just around $355 million in debt.
This company has appeal for income investors because it has a history of raising the dividend. For example, in 2005, the quarterly dividend was 7 cents per share, but it is risen five-fold in just 7 years to 35 cents per quarter. With this stock near the low-end of the recent trading range, buying dips could reward mid to long-term investors and the yield will pay you to wait for a higher share price. It's easy to see why Cramer likes the stock at current levels.
Here are some key points for MCHP:
- Current share price: $32.20
- The 52 week range is $29.30 to $38.88
- Earnings estimates for 2012: $2.04
- Earnings estimates for 2013: $2.27
- Annual dividend: $1.40 per share which yields 4.3%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: 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.