If you’re thinking about stock investments, then look no further than technology stocks. It’s best to diversify your portfolio to cover a well-rounded group of industries, and having your eye on the blossoming tech sector is a smart move.
That’s why I’ve brought together three well-performing tech stock picks with positive stock price forecasts which are likely to be a valuable addition to your stock portfolio. They all have solid fundamentals and strong long-term growth potential.
Cisco Systems, Inc. (NASDAQ:CSCO)
Cisco Systems, Inc. (NASDAQ:CSCO), a large international IT giant, only began handing out dividends to its shareholders in 2011. But that payment has risen significantly since then. The current yield stands at 3.25%, which exceeds that of many of its competitors. (Source: NASDAQ, last accessed September 15, 2015.)
The company is one of the largest entities in its industry, with the proportion of the networking hardware industry it controls being larger than that of any of its peers. The size of its operation and dominant position in the marketplace allows Cisco to churn out substantial amounts of liquid cash, amounting to $11.3 billion so far in 2015. (Source: Cisco, last accessed September 15, 2015.) Of this amount, approximately $4.3 billion will be paid out in the form of dividends over the next 12 months.
This gap between available cash flow and total dividend payment volume allows the company to increase dividends if necessary. This is a favorable position for Cisco to find itself in, as sales are plummeting in Asian markets, as well as growing pressure from cloud-based firms manufacturing their own network hardware components.
This drive however, where competitors are looking to couple inexpensive hardware with software, hasn’t translated into a disruption in Cisco’s revenue. This underlines the core strength and competitive advantage of the company, which is its high-quality networking hardware.
Taken together, Cisco’s resilience in the face of competition and its financial buffer and ability to increase dividend payments at makes this one heck of a solid stock pick.
International Business Machines Corporation (NYSE:IBM)
International Business Machines Corporation (NYSE:IBM) remains of the most recognizable companies in the technology sector. It has a significant market presence, as well as a solid record in business fields such as IT services, hardware, and software, along with various other segments. Developing integrated and multifaceted solutions to customers’ needs across overlapping areas is one of the pillars of IBM’s strength.
But the tech sector is constantly evolving, which represents an ever-present challenge for not only IBM but also its competitors. IBM has had a proven track record of paying out dividends to its shareholders for nearly a century.
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Indeed, IBM has never missed a dividend payment, ever since the company’s founding in 1916. Moreover, dividend payments have steadily and consecutively increased in the past two decades.
From a strictly financial balance sheet point of view, IBM has a robust cash flow of $4.5 billion in the first six months of 2015. (Source: IBM, last accessed September 15, 2015.) Dividend payments amounted to just $2.4 billion of this amount, which lends a great deal of strategic flexibility to IBM. Most importantly, the company has the room to increase payments to its shareholders without putting any negative financial stress on itself.
IBM stock currently pay out a dividend yield of 3.6%, which while not extraordinarily high, is nothing to scoff at when you consider the size and growth trajectory of the beginning. (Source: NASDAQ, last accessed September 15, 2015.)
Now that’s the sort of setup a wise investor is looking for.
NVIDIA Corporation (NASDAQ:NVDA)
NVIDIA Corporation (NASDAQ:NVDA) is a developer of high-end graphics cards for PCs. The company began issuing dividend payments to its shareholders in 2012 with a modest quarterly payment in $0.075. (Source: NASDAQ, last accessed September 15, 2015.)
Now, Nvidia certainly hasn’t gone all-out in terms of increasing the quarterly payment. Since 2012, it has upped the amount twice, to $0.0975, which amounts to approximately 1.73%.
But this is almost surely going to increase; and here’s why.
Nvidia’s stock surged by 12.7% in August, mostly on the back of growing sales numbers in its game processing units (GPUs) in the second quarter of 2015. (Source: USA Today, last accessed September 15, 2015.) This allowed the company to surpass the market trends which hurt its competitors.
Nvidia paid out $551 million in dividends to its shareholders thus far in 2015, if buybacks are included. (Source: NVIDIA, last accessed September 15, 2015.) This also takes into account a second quarter $400 million accelerated repurchase agreement with shareholders.
The graphics card giant generated free cash flow in the area of $139 million during the second quarter, ending off the quarter with impressive $4.5 billion cash on hand. This is offset by $1.4 billion in balance sheet debt, but still allowing for plenty of growth-oriented plans while keeping Nvidia shareholders happy.