Merrill Lynch Has 4 Blue Chip Dividend-Paying Tech Stocks for 2016

Technology

Published: December 10, 2015 8:35 am

Last Updated: January 13, 2020 4:15 pm

We have written at great length about the struggle dividend-paying stocks had in 2015. With an eye constantly focused on the Federal Reserve lifting interest rates, investors avoided dividend stocks for more momentum growth companies. Many Wall Street analysts feel that dividend stocks will come back in favor next year, and combined with an overall Wall Street preference for the technology sector, could provide solid upside for investors.

We screened the Merrill Lynch research database universe for technology stocks that are rated Buy, and also pay good dividends. We found four companies that would fit well in aggressive growth portfolios for 2016.

Cisco

This is one of the top mega-cap technology stock picks on Wall Street and perhaps a surprising defensive pick for volatile markets like we have witnessed. Cisco Systems Inc. (NASDAQ: CSCO) posted disappointing earnings in November, and many on Wall Street have lowered their price targets for the networking giant significantly. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.

Earlier this year Cisco won an important contract for the Verizon build-out of its next-generation 100G metro network. While Cisco’s optical business is small as a part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.

Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion plus run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security also are adding to the total sales profile and product mix.

Cisco investors receive a solid 3.14% dividend. The Merrill Lynch price target for the stock is $30, and the Thomson/First Call consensus target is $30.36. The shares closed most recently at $26.73.

Intel

This top chip company has traded sideways all year, and the recent very positive earnings report certainly has helped to lift the pall hanging over the company. Intel Corp. (NASDAQ: INTC) is one of the companies regarded as having among the highest shareholder cash returns, at approximately 8%, but it has lagged high-growth specialty chip stocks. The iconic chip giant had a stellar 2014 on the tailwind from continued personal computer (PC) sales, but this year has been a far different story. The stock has just now almost traded back to where it began 2015.

Intel recently purchased chip rival Altera for a massive $16.8 billion. Some on Wall Street view the deal pessimistically, citing its high cost, aggressive growth assumptions on the part of Intel and the increase in debt. Others feel the addition will help Intel start to move away from the PC dependence. The acquisition would put Intel into the traditional fabless market of programmable logic devices, but ultimately by 2020 50% of Altera’s product line could be manufactured at Intel facilities.

Intel’s NAND flash memory business has a strong focus on enterprise opportunities. Many on Wall Street think that the company’s new chip, which is a collaboration with Micron Technology called the 3D XPoint, could be primarily In-Memory compute in servers and its launch should coincide with Intel’s Purley platform server launch in 2016.

Intel investors receive a 2.75% dividend. The Merrill Lynch price target recently was raised to $40. The target is $35.92. Shares closed Wednesday at $34.81.