The U.S. Federal Reserve cut its benchmark interest for the second time this week by 25-basis points to between 1.75% and 2%. Yet, Fed Chairman Jerome Powell has not committed to additional rate cuts because the U.S. economic picture remains relatively strong, despite the specter of the ongoing trade war between the world’s two largest economies.
The broader global economic picture is somewhat gloomy, but both the Dow and the S&P 500 sit less than 1% below their record highs. And with interest rates so low, investors will likely stay in stocks, at least for now. With this in mind, we searched for strong tech companies that also pay a dividend, utilizing our Zacks Stock Screener.
These three tech stocks should remain attractive to investors even during a potential downturn…
1. KLA Corporation KLAC
KLA Corporation, formerly known as KLA-Tencor, is a semiconductor equipment firm based in Milpitas, California. KLAC makes process control and process-enabling solutions for everything from wafers and reticles to integrated circuits and flat panel displays. The firm posted stronger-than-projected top and bottom-line results last quarter (Q4 fiscal 2019) and its shares have soared 25% since then. Better yet, KLAC stock is up a whopping 77% in 2019, which blows away its industry’s 26% average climb. KLAC has also jumped 52% in the past 12 months, compared to its industry and the S&P 500’s roughly sideways movement.
Over the past three years, KLAC stock has easily outpaced its industry, up 127%, against 48%. The impressive run helps the company rest right at its all-time highs. Despite the climb, KLAC is trading at 16.2X forward 12-month Zacks Consensus earnings estimates, which marks a discount against its industry’s 18.5X average and its own three-year high.
KLAC currently pays an annualized dividend of $3.00 per share for a 1.91% yield, which comes in above the 10-year U.S. Treasury’s 1.77% payout. The company is also projected to see its current full-year earnings jump 11.1% on 21.2% higher revenue. KLAC is a Zacks Rank #2 (Buy) at the moment and has seen its fiscal 2020 and 2021 earnings estimates surge.
2. Microsoft MSFT
Microsoft is not a Zacks Buy-Ranked stock at the moment, sitting at a #3 (Hold). Nonetheless, the historic tech titan, which does earn “A” grades for Growth and Momentum in our Style Scores system, looks strong after it hit brand new highs earlier this week. The Redmond, Washington-based firm announced an 11% dividend increase and a new $40 billion share buyback program on Wednesday.
MSFT has now raised its quarterly dividend every year since it began paying one in 2004. The firm’s new $2.04 per share annualized payout puts its yield at 1.45%. This dividend yield is more impressive considering that Microsoft shares have climbed 22% over the last 12 months to top all of the FAANG stocks—second-place Facebook FB stock is up just 16%, with Amazon AMZN down 6%. Shares of MSFT have also skyrocketed 142% in the last three years, against its industry’s 41%.
The company has expanded its cloud computing segment over the last several years to become the second-largest player in the quickly-growing space. Peeking ahead, our estimates call for Microsoft’s fiscal 2020 revenue (last reported Q419) to jump 11.2%, with 2021 projected to come in 10.5% above that. These estimates come on top of 2019 and 2018’s 14% sales expansions. Meanwhile, MSFT’s EPS figures are projected to pop 10.1% and 12.8%, respectively. Despite all the positivity and growth, the firm’s valuation picture is hardly that bloated, trading at a discount against its industry and its peer group, which includes Oracle ORCL, Salesforce CRM, and other giants.
3. Garmin Ltd. GRMN
Many investors might only think of Garmin as a retail-level maker of GPS devices, smartwatches, and fitness trackers that compete with the likes of Apple AAPL and Fitbit FIT. The firm’s in-car navigation systems did help it become a household name, but Garmin sells a ton of other products from high-end fish finders to advance radars for aviation and boating. The Switzerland-headquarter firm’s Q2 revenue popped 7% to come in above our quarterly estimates, with its Aviation and Marine units up 20% and 13%, respectively.
Garmin is a Zacks #2 (Buy) that has seen its stock surge 35% in 2019 and 64% over the past two years, to top its industry’s 13% climb and S&P 500’s 20% jump. The GPS firm’s climb makes its current 2.67% dividend yield—almost 1% above the 10-year Treasury—look all the more impressive. Garmin’s forward earnings multiple of 21.4X also marks a discount against its own two-year high of 23.8X.
Plus, GRMN is part of the Electronics – Miscellaneous Products industry that sits in the top 15% of our 255 Zacks Industries. And Garmin’s Q3 revenue to is projected climb to 6.7%, with Q4 sales expected to jump 9% to $1.02 billion. At the bottom end, the company’s 2019 earnings are projected to pop 5.7%.