The maturation of the old-school technology companies like Microsoft (MSFT), Apple (AAPL), Intel (INTC) and Cisco (CSCO) has created an attractive environment for investors that are looking for growth opportunities, but also would like to have some income rolling in.
Consider this, the 10-year Treasury yields are at about 2.25%.
This yield is lower than the yields on Microsoft, Intel and Paychex (PAYX), and each of these companies are closing out a year in which all three have outpaced the market and are headed into a bullish looking New Year.
With an interest rate outlook that’s as clear as mud, we’re of the mind that investors are served well to consider using the potentially powerful combination of these growth-income stocks in their portfolios this year.
Tech Stocks With Big Dividends: Microsoft (MSFT)
Dividend Yield: 2.58%
OK, we can admit it, Microsoft stock has been on a number of our 2016 bull lists, including this one.
The rationale is solid, though. This technology company is turning back into a true growth prospect as Microsoft is forging forward into the cloud computing business. It’s going to take a lot to challenge current leader Amazon (AMZN), but Microsoft has the tools to make a dent in the market.
At the same time, the company’s laser-like focus is starting to benefit the product lines outside of the Cloud as Windows 10, Surface tablets and Bing are gaining traction among retail markets to help turn revenue back to a positive growth trend.
Microsoft’s dividend yield has averaged 2.5% over the last five years. The company has also raised its dividend five times over the same period. Our models are forecasting another 20% year for Microsoft’s stock price on top of the 2.6% dividend yield.
Tech Stocks With Big Dividends: Intel (INTC)
Dividend Yield: 2.75%
Intel feels like the company that investors have forgotten over time as Intel stock languished for ten years. Now, the company has put together some strategic mergers and has turned back into a force in the semiconductor industry.
Intel’s dividend hasn’t seen an increase since 2012, but the shares are still yielding nearly 2.8%. The company has maintained a solid performance on the earnings from, beating estimates seven of the last eight quarters.
Intel did see a slight drop in year-over-year revenue growth recently, but a return to positive territory in 2016 may spur the company to raise its dividend making it even more attractive.
We expect Intel stock to move about 14% higher during 2016 to our target price of $40 per share. That, in addition to the 2.8% dividend yield (which will move lower as the price increases) puts Intel stock at near the top of the list of Technology Dividend stocks to hold in 2016.
Tech Stocks With Big Dividends: Paychex Inc. (PAYX)
Dividend Yield: 3.11%
For most people, Paychex doesn’t pop out as a technology stock, but the company is one of the leaders in the automated payroll field.
Fundamentally, Paychex stock has gotten a huge boost as the company has grown due to growth in the employment market. In addition, the company’s offering to help businesses with payroll taxes and compliance with the Affordable Care Act has helped grow the bottom line.
Paychex currently pays a dividend yield of 3.1%, putting it in the top 10 dividend payers in the Nasdaq 100 Index. The company has lifted its dividend five times in the last five years to maintain its 2.5% yield.
Sentiment towards Paychex is lackluster as 15 of the 17 analysts tracking the stock have it ranked a hold or sell. This means that there are a number of analysts that have been on the wrong side of the company as it returned almost 18% in 2015, making Paychex ripe for upgrades in 2016 as analysts play catch-up.
We love Paychex stock’s growth prospects for the New Year as our current models are maintaining a low-range price target of $60, though, we believe the upside is extensively higher. This represents a 14% gain on the stock price in addition to the 2.5% dividend yield.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.