Back in the 1990s, the Four Horsemen were those powerful four stocks that lead the Nasdaq higher day after day right up until the bubble burst.
Microsoft Corporation (MSFT), Dell Inc., Intel Corporation (INTC) and Cisco Systems, Inc. (CSCO) were the powerhouses that drove the technology revolution during the internet decade, and the stock prices went to seemingly impossible levels. Of course, the bubble eventually burst, and the share prices came back to earth. Yet, the companies themselves have continued to grow in the new century.
Now those Four Horsemen have grown into different types of powerhouses. Dell has gone private, but Microsoft, Intel and Cisco have turned into cash flow machines as they continue to dominate the tech industry. The remaining three horsemen have matured and may not be as exciting as they were in the heyday, but here’s why they remain superstars of growth and income investing.
Microsoft (MSFT) is still the global leader in the software and operating system business. Microsoft has added other businesses over the years like smart phones, the Xbox gaming platform and cloud computing and have strong positions in all those new markets as well.
The naysayers always have some reason Microsoft will falter, but year in and year out, Microsoft generates enormous amounts of cash and uses a portion of that cash to reward shareholders. In the last 12 months, Microsoft has generated $32 billion in cash flow from operations and paid out &9.2 billion in dividends.
In the past five years, Microsoft has been a dividend growth machine with the payout more than doubling for 50 cents per share to $1.24 per share today. Microsoft also spent more than $8 billion to buy back shares during the past year, which is the type of fundamental excellence that is rewarded with a high praise form Portfolio Grader. Microsoft stock is currently a “strong buy.”
The story is much the same at Intel (INTC), which just keeps dominating the chip space, and Intel products are now used in an incredible array of products including notebooks, desktops, servers, tablets, smartphones, automobile infotainment systems, automated factory systems and medical devices. Intel makes mobile components, online security products and wifi systems, and Intel has a strong market share in those businesses as well.
During the last year, Intel generated over $20 billion in operating cash flow, and much of it went to build shareholder value. Intel has paid out $4.4 billion in dividends and used $7.6 billion to buyback stocks. Intel is also a solid dividend growth story as the INTC payout has gone from 56 cents per share to 90 cents per share over the last five years.
Intel stock has seen its excellent performance rewarded with an “A” from Portfolio Grader, and INTC stock is a “strong buy.”
The market for networking equipment may have grown more competitive over the years, but Cisco (CSCO) is still the dominant company in the marketplace. Cisco has expanded along with the industry and offer products for mobile equipment and systems, cloud computing security products and data center products.
In the last year, Cisco has generated over $12 billion in operating cash flow, and a lot of cash has been directed for the benefit of Cisco shareholders. Cisco paid out $3.8 billion in dividends repurchased $8.6 billion worth of stocks in the last 12 months. Dividends have gone from 12 cents per share in 2011 to 76 cents per share today.
Just last week, Portfolio Grader upgraded CSCO stock to a “B,” and Cisco stock is a “buy” at the current price.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.