U.S. stocks bounced back Wednesday after they slipped Tuesday on fears about the spread of a potentially deadly virus that began in central China. Overall, the Dow, S&P 500, and Nasdaq continue to race to new highs and economists predict further global and U.S. expansion in 2020.
The phase-one trade deal between the U.S. and China, low interest rates, and an expected return to earnings growth, are all projected to drive growth in 2020. With that said, investors should always think about adding income to their portfolios. And finding tech stocks that pay a solid dividend helps provide exposure to potential growth as well.
So check out these three high-yield tech stocks we found using our Zacks Stock Screener that dividend investors might want to buy right now…
NetEase, Inc. NTES
NetEase is a leading Chinese video game developer that has expanded into international markets such as Japan and North America. Online games continue to drive sales and the firm has partnerships with fellow industry giants such as Blizzard Entertainment ATVI to launch games for the massive Chinese market. For reference, the global gaming industry is projected to hit $152 billion in 2019 and jump to $196 billion by 2022, according to Newzoo—and China, the U.S., and Japan are the three largest markets.
Along with its gaming business, NetEase is focused on growing its e-commerce unit, online education services, and digital music segment, which includes a recent investment from Alibaba BABA. NetEase’s blowout Q3 earnings helped management reward investors with a higher dividend. NTES’ current dividend yield rests at 4.86%, which blows away the 10-year U.S. treasury’s 1.76%, and fellow gaming power Nintendo’s NTDOY 0.92%.
Shares of the Beijing-based company have surged over 43% since it reported its Q2 results in August to crush its industry’s 12% climb. Plus, the phase-one trade deal should help build investor confidence as it climbs back to its highs. NetEase’s positive earnings estimate revisions help it hold a Zacks Rank #1 (Strong Buy). NTES is also trading at a discount against its industry—which rests in the top 20% of our over 250 Zacks industries—in terms of forward 12-month Zacks earnings and sales estimates.
IBM impressed Wall Street Tuesday when it topped earnings estimates and posted revenue growth, after five straight quarters of declining sales. Although overall Q4 revenue growth came in at 0.1%, cloud computing sales surged 21% to account for roughly 31% of total sales. The historic tech giant was a little late to push into cloud, but its recently-reported quarter marked its strongest growth yet as it tries to catch up to industry giants Amazon AMZN and Microsoft MSFT.
Meanwhile, Red Hat sales popped 24% to help show why IBM acquired the open-source software firm for $34 billion in a deal that officially closed in July 2019. The firm also provided upbeat 2020 guidance, which means our Zacks estimates are likely to be updated in the coming days as analysts make revisions. Shares of IBM surged over 3% Thursday and the positivity could help IBM stock regain some momentum.
IBM is currently a Zacks Rank #3 (Hold) that sports an “A” grade for Value in our Style Scores system. IBM is trading at 10.5X forward 12-month earnings, well below its industry’s 19.3X average and at 1.6X sales, against 2.9X. Looking ahead, the firm’s earnings and revenues are projected to climb both this year and next. Plus, IBM, which consistently raises its dividend, has a yield of 4.66% right now. This tops Qualcomm’s QCOM 2.62% yield and Cisco’s CSCO 2.87%.
Broadcom Inc. AVGO
Broadcom is a semiconductor firm that has expanded into infrastructure software solutions through acquisitions, which include its nearly $19 billion purchase of CA Technologies and more recently Symantec’s enterprise software unit. Broadcom is coming off Q4 top and bottom line beats in December, where it signaled that it could potentially move on from its wireless-chip business.
CEO Hock Tan believes that its “core semiconductor business is bottoming and will return to year over year growth in the second half.” This is part of what is projected to be industry-wide semiconductor growth in 2020. Looking ahead, Broadcom’s 2020 revenue is projected to jump 10.7% to 25.02 billion, which is set to help lift adjusted earnings by 8.6%. AVGO’s adjusted 2021 EPS figure is then expected to pop another 10% on nearly 6% stronger sales.
Broadcom shares have soared over the last decade, but they have cooled off recently. With that said, AVGO stock is still up 65% over the last three years, 22% in the last year, and 12% over the past three months. Broadcom currently trades at a discount compared to its industry’s average, which rests in the top 9% of our 255 Zacks industries. And Broadcom’s dividend yields 4.22% at the moment, to easily top Intel’s INTC 2.08% and Texas Instruments’ TXN 2.75%.
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