For as much attention as bear markets get, they actually don’t come around all that often. When they do though, they present an opportunity for long-term investors. That’s as they scour for bargains in various sectors, like tech. With that in mind, let’s look for undervalued tech stocks with dividends.
The “with dividends” part may allow us to find some stocks that have slower growth, but have held up better amid the recent selling pressure.
That additional yield has become a bit less attractive, as yields of risk-free assets — Treasuries — have gone higher this year. Still though, it helps soften the blow of buying stocks while waiting for them to appreciate down the road.
When combined with a reasonable valuation and a sizable decline, these undervalued tech stocks with dividends become even more worthy of our attention. Let’s look at three of them now.
It’s hard not to be bullish on Broadcom (NASDAQ:AVGO), even if the stock has enjoyed a strong rally off the low. The company continues to deliver strong results, even as the economy remains questionable.
The stock suffered a peak-to-trough decline of 38%, better than many of its peers. However, many also fail to realize that Broadcom pays out a 3.3% dividend yield, too.
That dividend was raised 12% when the company last reported earnings. Alongside that dividend hike, Broadcom delivered a top- and bottom-line beat and better-than-expected first-quarter outlook.
As for expectations, analysts expect mid- to high-single-digit revenue and earnings growth in FY 2023 (just beginning) and 2024.
As for the “undervalued” part of undervalued tech stocks with dividends, Broadcom trades at a rather attractive valuation of 13.5 times this year’s earnings. However, should shares retest the lows, Broadcom will trade at roughly 10 times earnings, while its yield will swell to 4.5%.
Intel (NASDAQ:INTC) is becoming another name that’s hard to ignore. Only this time, there are concerns about how low the stock may go. I don’t know that its 52-week low of $24.59 will hold.
The stock recently enjoyed a 27.5% rally off the October low — when it hit its 52-week low — but has been under pressure once again. As a result, the stock pays a dividend of 5.6%. Of the stocks on this list, Intel’s is certainly the highest, although that comes along with being the worst performer over the last 12 months.
Shares trade at roughly 5 times last year’s earnings, but that doesn’t really matter; what matters is what the company will do going forward.
Unfortunately, analysts expect just under $2 a share in earnings this year, leaving the stock to trade at just under 13 times earnings. When will it be a bargain? At $20? Back below $15?
I don’t know that either of those scenarios will unfold.
What I do know is that Intel has become a conglomerate in the chip space. Eventually when things settle down and a trough is formed, this stock will be a solid long-term hold — especially if the company can maintain its dividend.
Last but certainly not least, we have Cisco Systems (NASDAQ:CSCO). Paying out a 3.2% dividend yield and Cisco has a respectable income stream for investors.
While Cisco has not been a big out-performer on the year, it has held its own. Shares are up 16% in the last three months and 7.5% in the last six months. Its 25% year-to-date drop is better than all of FAANG, Microsoft (NASDAQ:MSFT) and other so-called safe-haven mega-cap tech names.
In mid-November, the company delivered better-than-expected fourth-quarter results. Cisco then provided a strong outlook for its fiscal first quarter, as well as the full year.
For the year, analysts expect about 6% revenue and earnings growth. Next year, those expectations climb to almost 8% earnings growth despite revenue growth forecasts of just 4%.
That said, shares trade at a valuation of just 13 times earnings. If Cisco stock trades back down to $41 — a level it has hit several times this year — shares will trade at just 11.5 times earnings and yield will climb to 3.7%.
On the date of publication, Bret Kenwell 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.