Friday February 15, 2013
by John Buckingham, editor The Prudent Speculator
It is never easy to steer the ship through stormy seas, but the numbers simply don’t lie — the kind of dividend-paying, value-priced stocks that we favor historically have enjoyed superb long-term returns for those with the courage and conviction to stick with them through thick and thin.
Here's a look at three recommended dividend-paying technology stocks: International Business Machines (IBM), Intel (INTC) and NVIDIA (NVDA).
Impressively, IBM just closed its 10th straight year of double-digit earnings growth and recognized $18.2 billion in free cash flow for 2012, which is $12 billion better than a decade ago.
Earnings topped expectations and the company saw successful launches in high-end systems, while it began to reap rewards from its recent global growth initiatives.
Happily, stock repurchases for 2012 topped $10 billion, reducing the share count by 4%, while $8.7 billion is still remaining in buyback authorizations.
While we see the potential for a soft business environment in some parts of the world, namely Europe, we believe the future looks bright with IBM’s goal of $20 in EPS by 2015 still firmly on track.
We expect to see continued growth in demand for advanced chips from Intel, particularly for data centers and for Ultrabooks, both of which require high performance and low power consumption.
According to Intel, the volume of notebooks shipped that are less than an inch thin has risen 18 times in the last year in the U.S. and seems likely to keep that pace in the upcoming year. Such a forecast bodes well for the company, we believe, given its sizeable edge in the market.
To date, none of Intel’s competitors have mastered the space-saving and energy-efficient three-dimensional transistor, nor do any appear to have it in the near-term pipeline.
The company is set to launch its ‘Haswell’ line of processors, which Intel believes will make significant improvements upon the previous generation of processors by adding new architecture, or coding language, thereby improving speed, power usage and overall usability.
We like that Intel has a diversified revenue stream, low levels of debt, a competitive assortment of products and a 4.3% dividend yield.
NVIDIA is a top-tier designer, developer and marketer of three dimensional graphics processors for personal computing.
While a long-time leader in its industry, NVDA announced its first venture into the portable hardware device market when it unveiled the Project Shield mobile gaming platform at the Consumer Electronics Show last month.
In our view, the platform is unlikely to become the next Playstation, but it should serve well as a ‘proof of concept’ device that the company will be able to use to gain valuable data when designing its mobile chips.
Additionally, NVIDIA recently released its Tegra 4 mobile processor line, which boasts a quad-core CPU, reduced power consumption and 72 graphics processing cores.
While the company may see a slow ramp as manufacturers get on board with the Tegra 4 line, we believe that the performance superiority of the chip will lure many, especially considering that the processor runs faster than any offering from its competitors. The company’s inexpensive valuation and 2.4% yield offer an attractive entry point.
Learn more about this financial newsletter at John Buckingham, editor The Prudent Speculator.