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Tech dividend stocks are fumbling despite strong fundamentals

Tech dividend stocks are fumbling despite strong fundamentals
Siraj
Sarwar
1 month ago
3 mins read

The top tech dividend stocks are trailing the broader market and Nasdaq index since the beginning of this year despite experiencing a stunning rally in 2020.

The latest sell-off is backed only by rising yields and investor’s shift towards value stocks amid expectations over the economic recovery and easing social distancing restrictions.

Some Wall Street names are blaming lofty valuations for the tech sell-off. This is because the substantial 2020 rally has pushed tech stocks valuations to record levels.

For instance, Morgan Stanley chief investment officer Lisa Shalett claims that tech stocks valuations have come to be extraordinarily high levels. The performance of these stocks is highly dependent on interest rates remaining at these just historically low levels.

Great value investors like Warren Buffett suggest investors buy the beaten-down stocks when others fear. However, trading at a discount doesn’t make a stock a good buy. These stocks should also have strong fundamentals along with robust end-market demand.

Strong growth forecasts could support Apple and Qualcomm stocks

The largest tech giant Apple (NASDAQ: AAPL), is among the tech dividend stocks that are offering a buying opportunity for long-term investors, according to analysts. Shares of Apple are down almost 15% from an all-time high despite strong fundamentals.

Apple stock performance. Finviz chart

The company expects to generate more than 20% year over year revenue growth for the March quarter on the back of strong iPhone 12 sales. Moreover, the potential iPhone 13 launch during the second half of 2021 will boost investors’ sentiments.

Apple currently offers a quarterly dividend of $0.20 per share. The company has raised dividends in the past eight straight years while an average dividend growth rate stood around 9% in the past five years.

On the other hand, shares of Qualcomm (NASDAQ: QCOM) are down 15% year to date and fell more than 18% from the all-time high that it had hit last month.

Despite the sell-off, its future fundamentals are strengthening amid robust demand for its chips. The semiconductor company offers a dividend yield of more than 2% at present.  

Qualcomm stock performance. Finviz chart

Piper Sandler analyst Harsh Kumar believes a strong stock price decline has created a compelling entry point for new investors.

“The pullback has let Qualcomm trading at a 5-year low relative to the SOX on a P/E basis and QCOM “is one of the cheapest in large/mega cap semiconductors,” he said.

Tech dividend stock Broadcomm offers a strong dividend yield

Broadcom’s (NASDAQ: AVGO) share price plunged almost 10% from its all-time high due to the broader market selloff. Its shares are currently trading around $420 and offer a dividend yield of 3.20%.

Broadcom stock performance. Finviz chart

The company has raised dividends in the last ten successive years. Its average dividend growth rate stood around 50% in the last five years. The company expects to generate double-digit revenue growth in 2021.

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Siraj Sarwar
Author

Siraj is a finance writer based in Saudi Arabia with a strong understanding of and passion for the stock market, cryptocurrency, economics, and finance. He has worked for international clients for many years on several projects related to the stock market, equity research, accounting, and finance. Siraj is a published financial analyst on some of the largest finance websites.