Dividend stocks have been regaining momentum recently because investors have been hedging their portfolios against a decelerating economic recovery and surging market volatility by seeking holdings that deliver steady income streams. This is evidenced by iShares Select Dividend ETF’s (DVY) 2% gains over the past five days versus the benchmark S&P 500 index’s 0.9% returns.
Despite major indexes hitting their all-time highs over the past two weeks, rising investor concerns regarding the rapid spread of the COVID-19 Delta variant, and consequent re-imposition of mask mandates and potentially other restrictions in the United States, have increased market volatility significantly. The CBOE Volatility index has gained 14.3% over the past month. Furthermore, the decelerating economic recovery is evidenced by the disappointing 6.5% GDP growth rate in the second quarter. It is nearly two percentage points short of the Dow Jones 8.4% consensus estimate. With the Fed recently reiterating its near-zero interest rate stance, high-yielding dividend stocks could be ideal investment bets for income investors. Furthermore, tech stocks are expected to perform well amid rising COVID-19 related concerns as companies continue to operate through remote structures.
Given this backdrop, we believe high-yield tech stocks International Business Machines Corporation (IBM), Seagate Technology Holdings plc (STX), Hewlett Packard Enterprise Company (HPE), and Xerox Holdings Corporation (XRX), with stable dividend payout histories, should be the good bets now.
International Business Machines Corporation (IBM)
IBM provides integrated solutions and services worldwide. The Endicott, N.Y.-based company operates through six segments—Cloud & Cognitive Software; Global Business Services; Global Technology Services; Systems; Global Financing and Other. It offers application, technology consulting and support, process design and operations, cloud, digital workplace, and network services, as well as business resiliency, strategy, and design solutions.
IBM is scheduled to pay a $1.64 quarterly cash dividend on September 10, 2021. The stock pays a $6.56 dividend per share annually, which translates to a 4.62% yield. The company’s dividend has grown at a 4.3% rate over the past five years.
On July 28, 2021, IBM and SAP SE (SAP) announced SAP’s intention to onboard two of its finance and data management solutions to IBM Cloud for Financial Services. The collaboration will enable the companies to address the financial industry's stringent compliance, security, and resiliency requirements, while supporting business transformation and innovation for financial services institutions.
IBM’s total revenue for its fiscal second quarter, ended June 30, 2021, increased 3.4% year-over-year to $18.75 billion. The company’s non-GAAP gross profit has been reported at $9.24 billion, up 4% from the prior-year period. Its non-GAAP operating income came in at $2.53 billion for the quarter, representing a 9.3% year-over-year improvement. IBM’s non-GAAP net income has been reported at $2.10 billion, up 7.9% from the prior-year period. Its non-GAAP EPS increased 6.9% year-over-year to $2.33. The company had $7.35 billion in cash and cash equivalents as of June 30, 2021.
Analysts expect the stock’s EPS to increase 23.5% for the current year to $10.70. The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. The $75.22 billion consensus revenue estimate for the current year represents a 2.2% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 16.3% rate per annum over the next five years.
IBM has gained 30.3% over the past nine months and 19.2% over the past six months. It closed yesterday’s trading session at $141.93.
IBM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value, Momentum, and Quality. Click here to see the additional ratings for IBM (Growth, Stability, and Sentiment).
IBM is ranked #13 of 45 stocks in the B-rated Technology - Hardware industry.
Seagate Technology Holdings plc (STX)
STX, in Dublin, Ireland, develops, produces, and distributes data storage products and electronic data storage solutions. It also provides storage subsystems and mass capacity-optimized private cloud storage solutions for enterprises, cloud service providers, and scale-out storage servers and OEMs.
STX is scheduled to pay a $0.67 quarterly dividend on October 6, 2021. The stock distributes a $2.68 per share dividend annually, which translates to a 3.07% yield. The company’s dividend has grown at a 7.2% rate over the past five years.
On June 23, 2021, STX launched its newest PC gaming SSD, the FireCuda 530, at its inaugural virtual gaming event, SG21. This new drive offers gamers the latest PCIe Gen4 NVMe SSD technology and the fastest performance from STX’s line of PC gaming storage products, thus bringing speed, endurance, and high capacity to the peak of PC performance. STX expects to see good demand for this drive in the coming months.
For its fiscal fourth quarter, ended July 2, 2021, STX’s revenue increased 19.7% year-over-year to $3.01 billion. Its non-GAAP gross profit has been reported at $892 million, representing a 30% improvement year-over-year. STX’s non-GAAP income from operations came in at $546 million, up 46.4% from the prior-year period. While its non-GAAP net income increased 49.8% year-over-year to $466 million, its non-GAAP EPS increased 66.7% year-over-year to $2. The company had $1.21 billion in cash and cash equivalents.
A $2.21 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 137.4% rise from the prior-year period. STX surpassed the Street’s EPS estimates in three of the trailing four quarters. Analysts expect STX’s revenue to improve 34.2% year-over-year for the current year to $3.11 billion. Its EPS is expected to improve at a 15.4% rate per annum over the next five years.
The stock has gained 83% over the past nine months and 31.9% over the past six months. It ended yesterday’s trading session at $87.20.
STX’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
STX has a B grade for Growth and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see STX’s ratings for Value, Momentum, Sentiment, and Stability here.
STX is ranked #22 of 45 stocks in the Technology Hardware industry.
Hewlett Packard Enterprise Company (HPE)
HPE provides information technology, technology, and enterprise products, solutions, and services worldwide. The Palo Alto, Calif.-based company offers enterprise security, analytics and data management, applications development and testing, data center care, cloud consulting, and business process services.
HPE paid a $0.12 quarterly dividend on July 7, 2021. The stock distributes $0.48 per share annually, which translates to a 3.3% yield. The company’s dividend has grown at a 42.3% rate over the past five years.
On July 20, 2021, Woolworths Group (WOLWF), an Australian retail company, selected the HPE GreenLake edge-to-cloud platform to power its new Wpay payments platform. HPE GreenLake’s easy-to-manage cloud platform allows customers to innovate with agility, scale up and down to meet business requirements, and improve visibility and cost management. HPE’s net revenue for its fiscal second quarter, ended April 30, 2021, came in at $6.70 billion, representing an 11.5% year-over-year improvement. The company’s non-GAAP gross profit increased 19% year-over-year to $2.30 billion. Its non-GAAP earnings from operations have been reported at $685 million, representing a 58.6% rise from the prior-year period. HPE’s non-GAAP net earnings have been reported at $612 million, up 77.9% from the year-year period. And its non-GAAP EPS has increased 70.4% year-over-year to $0.46. The company had $4.63 billion in cash and cash equivalents as of April 30, 2021.
For the current quarter, ending July 31, 2021, analysts expect HPE’s EPS to improve 32.5% year-over-year to $0.49. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $6.92 billion for the current quarter, representing a 1.6% rise from the prior-year period. The stock’s EPS is expected to grow at an 11.6% rate per annum over the next five years.
HPE has rallied 70.6% over the past nine months and 17.9% over the past six months. It ended yesterday’s trading session at $14.55.
It’s no surprise that HPE has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B grade for Value. Click here to see the additional ratings for HPE (Sentiment, Stability, Quality, and Momentum).
HPE is ranked #19 of 56 stocks in the B-rated Technology - Communication/Networking industry.
Xerox Holdings Corporation (XRX)
Norwalk, Conn.-based XRX designs and develops document management systems and solutions for banking, education, government, healthcare, manufacturing, and retail industries worldwide. The company offers workflow automation, enterprise content management, document transaction processing, packaging printing, and managed print services.
XRX is scheduled to pay a $0.25 quarterly dividend on November 1, 2021. The stock distributes a $1 per share dividend annually, which translates to a 4.12% yield. The company’s dividend has grown at a 5.2% rate over the past five years.
On June 2, 2021, XRX acquired Document Systems, a leading document solutions provider in Southern California, to strengthen XRX’s market reach in the U.S. small- and midsize business (SMB) markets. Because SMBs have become more reliant on communication technologies, remote IT support, and security hardware and software since the pandemic, Document Systems’ management expertise will likely help XRX further enhance customer experience and improve productivity.
XRX’s total revenues for its fiscal second quarter, ended June 30, 2021, increased 22.4% year-over-year to $1.79 billion. The company’s gross profit came in at $639 million, up 13.3% from the prior-year period. Its adjusted operating profit has been reported at $126 million, representing a 103.2% year-over-year improvement. While its adjusted net income increased 161.1% year-over-year to $94 million, its adjusted EPS increased 213.3% year-over-year to $0.47. The company had $2.12 billion in cash and cash equivalents as of June 30, 2021.
A$1.82 consensus EPS estimate for the current year represents a 28.9% rise from the prior-year period. The $7.27 billion consensus revenue estimate for the current year represents a 3.6% rise from the prior-year period. XRX has gained 37.6% over the past nine months and 15.5% over the past six months. It closed yesterday’s trading session at $24.28.
XRX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Quality and Value. We also have graded XRX for Growth, Stability, Sentiment, and Momentum. Click here to access all XRX ratings.
XRX is ranked #14 of 73 in the Technology - Services industry.
IBM shares were trading at $141.06 per share on Friday afternoon, down $0.87 (-0.61%). Year-to-date, IBM has gained 14.82%, versus a 18.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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