No doubt, high-dividend paying stocks look quite attractive now – especially in light of the recent market volatility and rock-bottom government bond yields. Yet many of these kinds of companies have few growth opportunities.
But there is one category that could be an exception: large tech stocks. Thus, if the economy does manage a comeback, there should be some nice capital gains for investors.
So which stocks look interesting? Here’s a look:
Intel (Nasdaq:INTC) – 4.2% dividend yield: Even though the company has been slow with its mobile strategy, the fact is it remains the dominant global player in semiconductors. It has thousands of top-notch engineers and a variety of state-of-the-art manufacturing centers.
In fact, with its huge cash flows, Intel is in a good position to acquire companies. For example, one key deal was for Infineon’s (Nasdaq:IFNY) mobile chips division. There was also the purchase of McAfee, which is a big provider of security software. This is definitely a long-term growth opportunity.
All in all, Intel’s valuation is fairly cheap. The price-to-earnings ratio is only 9.
Microsoft (Nasdaq:MSFT) – 2.6%: The company has been mostly reactive over the years. It did have the foresight to invest in Facebook, and for the most part Microsoft’s Internet business has been a dud. Unfortunately, the same is true for its mobile software division, and the company’s partnership with Nokia (NYSE:NOK) does not look like a winner.
Despite all this, Microsoft still has several powerful businesses. Its Office franchise is likely to remain a core part of businesses around the world, and even though it faces competition in this area – from Google (Nasdaq:GOOG) in particular – Microsoft is still making the right moves. For example, it recently launched its web-based Office 365 offering.
The company’s server business is also strong and should get a boost from the megatrend in cloud computing.
Computer Sciences (NYSE:CSC) – 2.8%: This is a giant IT services company that helps implement security systems, enterprise applications, hosting and even cloud software. What’s more, CSC has a broad footprint in industries like financial services, chemicals, natural resources, oil and gas, financial services, and utilities.
The company’s contracts are often long-term and deliver steady cash flows, while the customer retention rate is above 80%.
However, there is some risk. A large part of CSC’s revenues come from the US federal government, so there may be some weakness because of the expected budget cutbacks.
Ericsson (Nasdaq:ERIC) – 2.4%: The company is a provider of telecom equipment. While this has been a tough business, it looks like the environment is improving.
As should be no surprise, a big driver is the surge in smartphones and tablets, which will require more-sophisticated data networks. All in all, Ericsson has a highly competitive set of offerings.
The company also has a strong footprint in emerging markets, especially in China and India.
Tom Taulli is the author of various books, including “All About Commodities” and “All About Short Selling.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
