Although the innovation space generally focuses on growth, these tech stocks that pay dividends prove that the sector is more diverse than advertised. Essentially, investors can get the best of both worlds, leveraging the power of digitalization combined with passive income.
Increasingly, the market appears to reward a conservative framework rather than a guns-blazing pathway to business expansion. Yes, the Federal Reserve may be in a position to facilitate a soft landing. However, that’s far from a guaranteed outcome. Therefore, innovators may feel the heat, which may cynically bode well for tech stocks that pay dividends.
At their core, tech firms aim to bring practical solutions to the field, dramatically enhancing convenience and/or productivity. However, many of these entities suffer from financial viability concerns. And that’s where passive income provides a distinguishing attribute. Generally, companies that pay dividends feature established businesses.
With that in mind, you can have your cake and eat it too with these tech stocks that pay dividends.
IBM (IBM)
Admittedly, IBM (NYSE:IBM) doesn’t exactly engender confidence. While so many tech juggernauts generated significant returns so far this year, IBM can’t keep its head above water. Since the January opener, IBM lost 0.34%. Still, the legacy stalwart deserves more respect. As one of the top players in artificial intelligence and machine learning, the company offers significant long-term potential.
Also, after suffering from frustrating consolidation patterns amid certain business pressures, an argument can be made that shares of “Big Blue” may offer contrarian value. It’s not an unreasonable proposition either. According to investment data aggregator Gurufocus, IBM trades with a forward earnings multiple of 13.96, conspicuously below the sector median of 22.33.
Should the wheels start turning regarding capital gains, investors will more readily appreciate IBM’s forward yield. At 4.71%, that’s well above the tech sector’s average yield of 1.37%.
To be fair, IBM carries a consensus rating of hold, with a price target of $147.27 implying only 4% upside. Still, contrarians might want to give this overlooked name among tech stocks that pay dividends a try.
Qualcomm (QCOM)
Another powerhouse innovator that just hasn’t gotten off on the right foot in 2023, Qualcomm (NASDAQ:QCOM) arguably deserves a better standing. Since the January opener, QCOM gained just under 2.5%, which is quite lackluster. Also, in the trailing one-year period, shares slipped 12%. Earlier this year, concerns about broader economic headwinds have clouded semiconductor specialists.
At the core, industry experts warned that demand for smartphones and PCs may remain weak all year. That’s not a surprising outlook given the pressures associated with simultaneously high inflation and high borrowing costs. Nevertheless, it may also present an intriguing opportunity for contrarians. Right now, shares trade at only 11.93x forward earnings, below the semiconductor industry’s median value of 20x.
On the passive income side, Qualcomm carries a forward yield of 2.91%. Even better, it features a history of 21 years of consecutive dividend increases.
Finally, analysts peg QCOM as a moderate buy with a $135.62 target, implying over 23% upside potential.
Garmin (GRMN)
A multinational tech firm, Garmin (NYSE:GRMN) is perhaps best known for its consumer innovations. Thanks to its development of wearable tech, Garmin has been a strong competitor in the activity tracker and smartwatch markets. In addition, the company specializes in GPS solutions for the automotive, aviation, marine, outdoor, and sports activities segments.
On the surface, GRMN has been a better performer than many other tech stocks that pay dividends. Since the beginning of this year, shares gained a bit over 11%. In the past 365 days, they swung up more than 25%. Still, Garmin may bring relative value to the table.
Specifically, its three-year revenue growth rate comes in at 8.6%, above 62% of its direct peers. Yet it also trades at 20.14x trailing earnings, below the sector median of 21.5x. Of course, we also must factor ink in passive income, with GRMN carrying a forward yield of 2.8%. Lastly, analysts rate shares as a moderate buy with a $129 price target, implying nearly 24% growth.
Adtran (ADTN)
A fiber networking and telecommunications firm, Adtran (NASDAQ:ADTN) specializes in delivering scalable, end-to-end fiber networking solutions for communication service providers, enterprises, and government customers. Through its relatively recent directive, Adtran offers comprehensive service portfolios that bolster connectivity for residences, businesses, and 5G infrastructures. While a relevant cog of the broader tech ecosystem, ADTN also presents high risks.
Since the start of the year, ADTN fell 57%, a simply staggering loss. Part of the pain centers on underwhelming results for its second quarter. As well, management issued a tough warning about customers optimizing inventory amid a difficult macroeconomic environment. Still, Adtran does bring positives, such as a three-year revenue growth rate of 14.1%, beating out 76.43% of its peers.
Notably, the company features a forward yield of 4.45%. Again, that’s well above the tech sector’s average yield of 1.37%. One thing to keep in mind, though, is the payout ratio of 64.86%. While not outrageously high, it’s not exactly low either. But to end on a positive, analysts rate ADTN as a moderate buy with a $10.33 target, implying almost 27% upside.
L3Harris Technologies (LHX)
A defense contractor and information technology services provider, L3Harris Technologies (NYSE:LHX) garnered its reputation through advanced command and control systems and products. As well, L3Harris features expertise in wireless equipment, tactical radios, avionics, and electronic systems, and night vision equipment, among other product categories. Despite exceptional relevancies, LHX fell nearly 21% since the January opener.
It’s not entirely clear what’s causing the volatility. For instance, in late July, L3Harris disclosed its results for the second quarter, beating analysts’ targets for both the top and bottom lines. As well, management updated its 2023 outlook, raising its revenue and earnings expectations. However, it’s possible that investors didn’t like that the bottom line decreased 8% in Q2 against the prior year.
Still, the red ink does make LHX trade at a forward multiple of 12.38x. Also, the company offers a forward yield of 2.78%, along with a sustainable payout ratio that sits at 34%. In closing, analysts peg LHX as a moderate buy with a $215.83 target, implying nearly 32% upside potential. For speculators, it could be an intriguing idea among tech stocks that pay dividends.
Open Text (OTEX)
Based in Canada, Open Text (NASDAQ:OTEX) develops and sells enterprise information management software. Per its public profile, Open Text is also Canada’s fourth-largest software firm as of 2022. It also happens to garner recognition as one of our northern neighbor’s top employers. Since the start of this year, OTEX gained 15%, which initially seems compelling.
Unfortunately, Open Text has raised some questions lately. In the trailing one-month period, OTEX gave up almost 14% of equity value. Thus, it’s one of the higher-risk, higher-reward ideas among tech stocks that pay dividends. Still, if you’re willing to take the chance, OTEX runs a forward earnings multiple of 7.24x, well lower than the software sector’s 22.33x median value.
Also, it’s worth pointing out that Open Text features a three-year revenue growth rate of 12.4%, above 60.38% of its rivals. As for passive income, the company carries a forward yield of 2.89%. Turning to Wall Street, analysts rate shares a strong buy with a $50.86 target, implying 47% upside.
Himax Technologies (HIMX)
Headquartered in Tainan City, Taiwan, Himax Technologies (NASDAQ:HIMX) is a leading supplier and fabless semiconductor manufacturer. Specifically, Himax specializes in display imaging processing solutions. As the leading provider of display driver integrated circuits (ICs) and timing controllers, the company commands wide applications, from laptops, to mobile phones, car navigation, and many other sectors.
However, Wall Street doesn’t really recognize the viability of Himax’s business at the moment. Since the January opener, HIMX slipped more than 7%. In the trailing one-month period, HIMX fell more than 3%, reflecting the ho-hum nature of tech these days. Nevertheless, Himax may offer deep value for contrarians. Right now, shares trade at only 9.49x forward earnings.
It’s also not a “cheap” undervaluation. What I mean is that operationally, Himax is robust, with a three-year revenue growth rate of 20.8%. In addition, HIMX carries a forward yield of 8.18%. That said, you should watch the payout ratio of 92.48%.
Finally, analysts rate HIMX a moderate buy with a $9 target, implying over 53% upside. For intrepid gamblers, Himax could be one of the most rewarding tech stocks that pay dividends.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
