As the market feels to be settling into a sideways trading range, many investors are becoming ever more concerned about how to utilize new capital. Should you wait and see if we have a big correction? Will the Trump administration unleash the power of the economy with a huge infrastructure project and cash repatriation program? Where are the best opportunities after an eight-year bull market run? The best ideas may be the simplest: stick with big, established companies that pay dividends.
One of the best sectors to stick with could be technology, and the winners could very well be some of the old guard that are adding to their capability and raising the dividends they pay to their shareholders. We screened the Merrill Lynch research database, and found four companies rated Buy that fit the bill, some of which have current catalysts that could drive share prices.
This leader in semiconductors is working hard to scale away from dependence on personal computers. Intel Corp. (INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company's platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Intel posted fiscal fourth-quarter earnings that were flat compared to the previous year, as well as revenue that was up 1%. But both the top and bottom lines exceeded the consensus analysts' estimates posted at Thomson Reuters.
This week the company announced the purchase of Mobileye for $15.3 billion. The Israel sensor company gives the chip giant a leg up in the autonomous car competition, and it also adds many other capabilities. While some say the valuation paid is high, the dividends down the road could be worth the price.
Intel investors receive a 2.96% dividend. The Merrill Lynch price target for the shares is $42, while the Wall Street consensus target is $40.34. The stock closed Tuesday at $35.18 a share.
This top old-school technology stock is top pick at Merrill Lynch, and it has a massive $136.79 billion sitting on the balance sheet. Microsoft Inc. (MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon's AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users.
Many believe the company continues to make steady progress with its cloud transition and expect Office 365 and Azure to be solid contributors to top and bottom line for the next several years. While not likely to snag the top slot from Amazon, it could add huge incremental revenue for years to come, especially when you factor in the huge revenue potential from the banks, insurance companies and the financial services industry.
Microsoft has reported quarterly earnings and revenue that easily topped analysts' expectations, as its key cloud product, Azure, saw revenue grow 102%. Fiscal fourth-quarter results exceeded the Thomson Reuters consensus estimates.
Microsoft shareholders receive a 2.37% dividend. Merrill Lynch has a $75 price objective, and the consensus target is $69.42. The shares close most recently at $64.41.
This remains one of the top chip equipment picks across Wall Street. Lam Research Corp. (LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device.
Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment market, driven by a strong focus on technology inflection spending over the next few years.
Despite so-so foundry and logic spending over the past year, many on Wall Street think that Lam will also continue to benefit from technology transitions such as FinFET, 3D NAND, multi patterning and advanced packaging in 2016 and beyond. Many analysts believe it is the “cleanest” semi-cap story benefiting from cyclical tailwind, SAM expansion and share gains.
The analysts noted that Lam Research reported solid results and an impressive shipment outlook. The $8 billion in estimated revenues was well ahead of Wall Street expectations for 2017. The wafer spending outlook looks strong, and the company should easily grow revenues over 20% year over year in 2017 and once again outperform the industry.
Shareholders receive a 1.52% dividend. The whopping $140 Merrill Lynch price target compares with a consensus target of $132.37. The shares closed Tuesday a $122.35.
This is a top technology stock was hit hard earlier this year and is offering investors a great entry point. Qualcomm Inc. (QCOM) designs, develops and supplies semiconductors and collects royalties on wireless handheld devices and infrastructure based on its dominant position in CDMA and other related technology patents.
In addition, Qualcomm provides systems software and components to wireless handset vendors and promotes applications and services that run on high-speed wireless networks. The company operates primarily through two segments: CDMA Technologies and Technology Licensing.
The company posted inline fourth-quarter results, but a lawsuit from Apple and some regulatory pressures weighed heavily on the shares. The company was also forced to defend the licensing model it has used for years and address patent leadership.
Merrill Lynch remains bullish on the company's acquisition of NXP Semiconductors, which Qualcomm is buying in an all-cash deal at $110 per share. The deal is expected to close at the end of 2017 and should be immediately accretive to earnings. The merger brings together complementary products for mobile, automotive, Internet of Things and networking applications.
Shareholders receive a 3.65% dividend. Merrill Lynch has set its price target at $66. The consensus is $64.99, and shares closed Tuesday at $58.22.
These four solid companies pay good dividends and have the staying power for investors. Given the market's big run, investors may want to scale buy shares over a three- to six-month period to hopefully grab some at lower levels.