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3 Tech Stocks for Dividend-Seekers

Brian Colello shares what makes these stocks stand out.

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Brian Colello: There are three investment ideas that we like that pay healthy dividends in the technology sector. This first one is Intel, trading at $50 per share. We think the stock is worth $65 per share. It pays a dividend of 31.5 cents per share per quarter, or $1.26 a year. That's about a 2.5% dividend yield. We have a wide moat rating on Intel. It stems from cost advantages realized in the design and manufacturing of chips. They faced a manufacturing delay, which led to a sell-off. They had issues with the CEO that have since been resolved. Long term, we think they'll overcome these issues. They will likely lose some market share to AMD, and they have been in the near term, but we think that's more than priced into the stock, and we're relatively more optimistic than the Street that they'll stem the share loses. And Intel has a lot of opportunities to grow outside of the PC and the data center, specifically in automotive with Mobileye. 

The next stock we like is Broadcom, trading at about $274. We have a $300 fair value estimate on Broadcom. So only slightly undervalued. But the company pays a dividend of $2.65 per quarter, $10.60 per year. And that's a 3.8% dividend yield at recent prices. We think Broadcom's a narrow-moat firm based on design expertise in a variety of areas, mostly in semiconductors. And they continue to acquire cash-rich businesses such as CA and Symantec's enterprise business. We don't see a lot of strategic synergies with these deals, but they're buying cash-rich businesses and should be able to fund this dividend.

Brian Colello does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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