Companies paying regular, even if not incremental, dividend have always been popular among investors. Not only do these stocks offer higher income in the current low-rate environment but also provide a cushion against equity market risks.
While the risk tolerance of an individual investor determines his appetite for growth versus dividend stocks, it’s generally prudent to balance the portfolio to keep a mix of both. Also, while some companies may offer a special dividend to distribute a windfall, it is always advisable to choose a consistent performer with strong fundamentals.
Each of the technology stocks below offer dividend yields of more than 2.5%. By combining high dividends, rising earnings estimates, and other valuation criteria, we have handpicked three promising stocks. Not only do these stocks have a high dividend yield but they also have a Zacks Rank #1 (Strong Buy) or #2 (Buy) indicating the likelihood of upside in the shares over the next month or so.
Cisco Systems CSCO
Headquartered in California, Cisco Systems is an Internet protocol (IP)-based networking company. It offers other products, technologies and related services to communications and information technology service providers, companies, commercial users and individuals.
This Zacks Rank #2 stock offers a robust dividend yield of 3.05%. The company has consistently increased the dividend over the past several years and performed decently on the earnings front as well. Cisco Systems has surpassed our EPS consensus in all the last four quarters at an average rate of 5.57% and its expected earnings growth rate over the next five years is 7.9%. The stock has also gained about 24% over the past year.
Linear Technology LLTC
Milpitas, CA-based Linear Technology is a leading original equipment manufacturer (OEM) of analog and mixed signal semiconductors. The company serves a diverse clientele in the communications, industrial, computing, high-end consumer, automotive and aerospace/military end-markets.
With a market capitalization of $11.09 billion, the company offers a promising dividend yield of about 2.6%. Moreover, the stock, which also carries a Zacks Rank #2, has a strong earnings history and is likely to continue to benefit from a solid business model and excellent products. The company has posted positive earnings surprises in three out of the last four quarters at an average rate of 4.20% and its expected earnings growth rate over the next five years is 10.2%. The stock has gained nearly 2.23% year-to-date.
Analog Devices, Inc. ADI
Headquartered in Massachusetts, Analog Devices is an OEM of semiconductor devices, specifically, analog, mixed signal and digital signal processing (DSP) integrated circuits. The company has manufacturing facilities in Massachusetts, Ireland and the Philippines.
This Zacks Rank #2 stock offers a promising dividend yield of 2.51% and has consistently raised the dividend over the past several years. The company has also performed well on the earnings front beating the Zacks Consensus Estimate in all the trailing four quarters at an average rate of 2.12% and its expected earnings growth rate over the next five years is 11.4%. Additionally, the stock has gained nearly 16.13% year-to-date and 22.03% over the past year.
Another stock with a dividend yield of 5.22% and a Zacks Rank #2 (Buy) is Electro Scientific Industries Inc. ESIO.
Bottom Line
Investing in these stocks should ensure a steady stream of income that is likely to grow over time. Moreover, consistent earnings growth is likely to translate into capital appreciation.
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