As the new year begins, investors should review their portfolios and see if they are well insulated from rising inflation, high interest rates, and other macroeconomic headwinds. These challenges can crush high-growth technology companies that are not profitable and trading at buttery prices.
However, blue-chip tech stocks that have wide moats, generate high profits, and trade at low valuations will remain more resilient during a market downturn. Here are three stocks that fit this description: HP (NYSE: HPQ)And Juniper Networks (NYSE: JNPR), And from Broadcom (NASDAQ: AVGO). Let’s learn a little more about these three high-yield tech stocks.
HP is one of the largest producers of computers and printers in the world. Both companies have grown during the pandemic as trends of work from home and DIY projects sparked new demand for new computers and printers, respectively.
HP’s consumer-facing business has faced tough comparisons after shutdown throughout 2021, but its business growth has compensated for that slowdown as more companies reopen and upgrade their legacy systems.
HP’s revenue and adjusted earnings are up 12% and 66%, respectively, in 2021. Analysts expect its revenue and adjusted earnings to grow by another 3% and 10%, respectively, in 2022, as its annual comparisons stabilize.
HP has also returned more than 100% of its free cash flow (FCF) to its investors through buybacks and dividends in 2021. It has reduced its stake by 36% over the past five years, and has increased its dividend every year since its launch Hewlett Packard Foundation in late 2015.
HP currently pays a forward dividend yield of 2.7% and its stock still looks cheap at less than nine times forward earnings. Its high yield, low valuation and stable growth rates make it a solid stock to own in a volatile market.
2. Juniper Networks
Juniper sells networking switches, routers, and security software. It is much smaller than the market leader CiscoBut it continues to grow at a steady rate as it sells more cloud-ready devices and services to offset the slow growth of legacy service provider products.
Juniper struggled in 2020 as the pandemic and other overall headwinds slashed demand for its products. Its supply chain and logistics expenses also rose and offset the growth of the higher-margin software business. But in the first nine months of 2021, its revenue was up 7% and its adjusted earnings per share remained flat as those headwinds gradually waned.
For the full year, analysts expect Juniper’s revenue and profit to rise 6% and 11%, respectively, as the company’s campus and data center customers resume network upgrades. Next year, they expect its revenue and earnings to grow by 5% and 14%, respectively.
Juniper pays a dividend yield of 2.2%. It doesn’t consistently raise those payments every year, but has only spent 44% of its earnings over the past 12 months – so it has plenty of room for future increases. Its stock still looks cheap at 18 times forward earnings.
Broadcom produces a wide range of chips for the data center, networking, data storage, and industrial markets. She also owns a smaller infrastructure software company, which she founded through a series of large acquisitions.
Broadcom saw a slowdown in 2020 as the pandemic disrupted its networks, automotive and industrial markets. However, the inorganic growth of its infrastructure software business partially softened that blow.
In 2021, Broadcom’s revenue and adjusted earnings were up 15% and 26%, respectively, with those end markets stabilizing. Analysts expect its revenue and earnings to grow by another 12% and 18%, respectively, this year.
Broadcom stock still looks reasonable at 21 times forward earnings, and it pays a forward dividend of 2.5%. That payout has been raised annually since Avago bought the original Broadcom and inherited its brand in 2016, and its dividend has amortized just 47% of FCF over the past 12 months.
Investors looking for a well-diversified semiconductor game that will benefit from the secular growth of next-generation markets — such as driverless cars and the Industrial Internet of Things (IoT) — should take a closer look at Broadcom.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.