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Tech Stocks for Dividend Investors to Buy as Q3 Earnings Season Heats Up

Benjamin Rains

Tuesday unofficially marked the start of third quarter earnings season, with reports from big banks like JPMorgan Chase JPM and other giants such as UnitedHealth UNH. Meanwhile, broader global slowdown worries remain despite recent progress on the U.S.-China trade war front.

The world’s two largest economies last week agreed in principle on a “substantial phase one deal,” in the words of President Trump. Wall Street and markets must now wait and see what comes next.

This means that investors might want to search for solid, established companies that pay a dividend amid the uncertainty. With this in mind, we used our Zacks Stock Screener to search for companies within the broader technology sector that also pay a dividend…

Verizon VZ

Shares of Verizon have outpaced wireless rival AT&T T over the last three years, up 19% against AT&T’s 4% downturn. Verizon has based much of its near-term future on its push to roll out its 5G service to more cities throughout the country, instead of trying to invest more heavily in the entertainment space to challenge the likes of Netflix NFLX, as AT&T has. Verizon has also cut costs under new CEO Hans Vestberg, who took over last summer, as it focuses on the next-generation of wireless communication and innovative ways to utilize 5G.

Verizon, which might regret its purchases of AOL and Yahoo, has now decided to partner with content players, which includes a deal with YouTube TV GOOGL, instead of investing in them. Looking ahead, our current Zacks Consensus Estimates call for Verizon’s adjusted fiscal 2019 EPS figure to jump 2.1% on 0.42% stronger sales. VZ is then expected to see its revenue climb 1.2% higher than our current-year estimate, with earnings projected to pop an additional 1.8%.

VZ has also seen its longer-term earnings estimate revision activity trend more heavily in the right direction recently. This positivity helps Verizon hold a Zacks Rank #2 (Buy) heading into the release of its Q3 FY19 financial results on Friday, October 25. Plus, VZ sports “B” grades for Value, Growth, and Momentum in our Style Scores system. And, of course, Verizon’s boasts an impressive 4.06% dividend yield to crush the 10-year U.S. Treasury note’s 1.74%. Investors should also note that this payout isn’t boosted by a selloff, with VZ stock up 11% during the last 12 months to sit near its 52-weeks highs.

Microsoft MSFT

Microsoft is set to report its Q1 fiscal 2020 earnings results on Wednesday, October 23. The historic tech giant has seen its stock price cool off a bit heading into earnings, up just 1.8% in the last month. Overall, MSFT stock is up 38% in 2019 and 27% in the last 12 months to blow away Apple’s AAPL 5.7% and Amazon’s AMZN 3% decline. MSFT stock currently rests just off its 52-week highs but its relatively sideways movement recently could give the stock plenty of room to run following earnings if the company is able to impress.  

Like VZ, Microsoft is currently a Zack Rank #2 (Buy) with a “B” grade for Growth. Meanwhile, the Redmond, Washington-based firm announced on September 18 that it will raise its quarterly dividend by 11% and introduce a new $40 billion share buyback program. MSFT has upped its quarterly dividend every year since it began paying one in 2004. The firm currently pays an annualized dividend of $1.84 per share, for a 1.30% yield—with its payout set to climb to $0.51 a share on Dec. 12 (to shareholders of record on November 21) to put its yield at 1.46% (at its current price).

Despite MSFT’s strong run, up 145% in the last three years vs. its industry’s 113%, Microsoft is still trading at a discount against its industry, which includes Oracle ORCL and Salesforce CRM, in terms of forward earnings. Microsoft has expanded its cloud computing business recently, much to the delight of Wall Street, as its Office and Windows businesses continue to thrive. MSFT’s fiscal 2020 revenue is projected to jump 11.2%, with 2021 set to pop another 10.5%. These estimates come on top of 2019 and 2018’s 14% sales expansions. Furthermore, MSFT’s adjusted fiscal year earnings are projected to surge 10.3% and 13%, respectively, over the next two years.

Cisco Systems, Inc. CSCO

Cisco is the only one of the three stocks on this list that doesn’t sport a #2 (Buy) ranking. Instead, the networking giant earns a Zacks Rank #3 (Hold) at the moment, alongside an “A” grade for Growth, which helps it rock an overall “B” VMG score. Cisco is also part of our Computer – Networking industry that currently rests in the top 15% of our 255 Zacks industries.

Cisco will issue its first-quarter fiscal 2020 financial results on November 13, with its adjusted Q1 EPS figure projected to jump 8% to reach $0.81 per share. Peeking further ahead, it appears that the historic tech firm’s expansion into areas such as IoT and its continued acquisitions will help drive growth. The San Jose, California-headquartered company is projected to see its full-year fiscal 2020 and 2021 earnings both jump by 8%. At the top of the income statement, Cisco’s FY20 revenue is projected to climb 1.8%, with 2021 projected to jump 3.1% higher to hit $54.51 billion.

On top of that, Cisco currently pays an annualized dividend of $1.40 per share, for a 3.02% yield. CSCO stock is up 39% in the last two years but it has fallen roughly 18% in the last three months to rest 20% below its 52-week highs. Shares of Cisco also sit below both their 50 and 200-day moving averages, as they have a few times in the last five years, before they bounced back in a big way. This means that Cisco stock could be due for a comeback, especially if it is able to post stronger-than-projected quarterly results or provide upbeat guidance.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report, Inc. (AMZN) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
AT&T Inc. (T) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
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UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
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