2020 will remain in the annals of Wall Street as one of the most bizarre years ever. After a punishing 35% decline in less than a month, the market roared back, despite the COVID-19 pandemic, to post all-time highs. As was the case over much of the past five years, the technology sector led the charge, and it continues to be a sector in which aggressive growth investors want to remain.
The problem for many investors who want to stay weighted to technology is that many of the momentum leaders are super high priced. If the sector hits some market turbulence and sells off, there could be some serious damage. One great idea is to look at tech leaders that also pay a solid and dependable dividend.
We screened the BofA Securities research database looking for Buy-rated technology stocks that also pay a higher dividend than the S&P 500, which as of Friday sat at 1.80%. While that seems low, it is higher than the yield on the 30-year U.S. Treasury bond.
Five stocks make the cut. While all are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This stock has rallied smartly off the lows and offers big upside potential. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Top Wall Street analysts like Broadcom’s leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand on the horizon.
The BofA Securities has remained positive on the shares, but in the past the firm noted the company’s large 15% exposure to iPhones. They said this earlier this fall when the company reported solid results:
Fiscal third quarter beat and fiscal fourth quarter ahead on 5G iPhone (wireless 50%+ quarter-over-quarter) & sustained cloud/networking (better than expected). We like the company’s diverse growth well positioned to benefit from trends of cloud/5G; 53% Free-cash-flow margin with room for a 10% dividend boost
Investors receive a 3.42% dividend. BofA Securities raised its price target to $450, well above the Wall Street consensus target of $402. Broadcom stock closed trading on Friday at $380.62.
This is a mega-cap tech leader for more conservative investors to consider. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Cisco’s cybersecurity products give clients the scope, scale and capabilities to keep up with the complexity and volume of threats. Putting security above everything helps corporations innovate while keeping their assets safe.
The company reported in-line revenues for the most recent quarter, but the disappointing guidance caused some sellers to come in. Many on Wall Street remain positive as 5G, 400G, optical and WiFi 6 are expected to drive 2021 growth.
Shareholders receive a 3.84% dividend. The $50 BofA Securities target price compares with the $46.93 consensus figure. On Friday, Cisco Systems stock closed at $37.53.