Coupled with newer technological innovations, increased adoption of advanced technologies could serve as an enduring tailwind for the tech industry. Therefore, let us probe into tech stocks Dolby Laboratories, Inc. (DLB), CTS Corporation (CTS), and Bel Fuse Inc. (BELFB), which have been drawing investors’ attention.
Before we delve deeper into the fundamentals of the stocks mentioned above, let us discuss the technology sector briefly.
In the past few decades, impressive technological advancements have transformed our lives and how businesses operate. Its countless and significant applications in every field substantiate the tech industry’s immense relevance in today’s globalized world.
Last year proved to be challenging for the tech industry. However, on the backs of cost-cutting measures and stronger-than-anticipated earnings, the industry witnessed an impressive recovery.
Digital transformation, due to its enormous benefits, is becoming increasingly important in both the private and public sectors. The increased spending on IT by firms could keep the overall tech industry on an upward trajectory.
In addition, the significant growth of the electronic component market could be attributed to technological advancements and the rising demand for consumer electronics, automotive electronics, industrial automation, and telecommunications equipment.
The global active electronic components market size is anticipated to grow at a CAGR of 10.5% to reach $527.70 billion by 2027.
Furthermore, amid widespread market volatility, investors would be inclined to invest in stocks with stable returns to secure their investments during downturns. Given this backdrop, dividend-paying tech stocks DLB, CTS, and BELFB, with notable fundamental strength, could be wise portfolio additions now.
Dolby Laboratories, Inc. (DLB)
DLB designs and manufactures advanced audio and imaging hardware and software for the entertainment, cinema, broadcast, and television industries. Its products enhance image and sound quality during content creation, distribution, and playback, providing a superior audiovisual experience for audiences.
On June 12, DLB and Cinépolis announced an agreement to deliver DLB’s spectacular experiences to more moviegoers across the globe.
Cinépolis is committed to install DLB’s innovative, industry-leading cinema solutions, IMS3000 servers, audio processing, loudspeakers, and Dolby Multichannel Amplifiers (DMA), as the core technology architecture for the remodeled and new theater complexes. This agreement marks a significant milestone for DLB and should bode well for the company.
On May 5, DLB announced a dividend of $0.27 per share of Class A and Class B common stock, paid to stockholders on May 23. DLB pays an annual dividend of $1.08 per share, which translates to a 1.29% yield on the current share price.
Its four-year average dividend yield is 1.17%. The company’s dividend payouts have grown at a CAGR of 7.6% over the past three years and 11.3% over the past five years.
DLB’s trailing-12-month ROCE and ROTA of 9.79% and 8.55% are significantly higher than the industry averages of 0.50% and 0.02%, respectively. Its trailing-12-month net income margin of 18.96% is 860.9% higher than the 1.97% industry average.
DLB’s revenue increased 12.4% year-over-year to $375.89 million in the fiscal second quarter that ended March 31, 2023. Its operating income increased 152% from the year-ago value to $109.22 million.
The company’s non-GAAP net income and earnings per share increased 30.4% and 37% year-over-year to $122.60 million and $1.26, respectively. Moreover, DLB’s total current assets, as of March 31, 2023, stood at $1.46 billion, compared to $1.31 billion, as of September 30, 2022.
The consensus revenue and EPS estimate of $297.13 million and $0.59 for the fiscal fourth quarter ending September 2023 represent increases of 6.8% and 8.6% year-over-year, respectively. It surpassed EPS estimates in three of the four trailing quarters.
For the full year of fiscal 2023, DLB expects its total revenue to be between $1.27 billion and $1.33 billion, whereas non-GAAP earnings per share is anticipated to range from $3.15 to $3.65.
DLB’s shares have gained 22.5% over the past six months to close the last trading session at $83.98. It has gained 19.1% year-to-date.
DLB’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DLB also has an A grade for Sentiment and Quality. Within the 39- stock Technology – Electronics industry, it is ranked #2.
Click here for DLB’s additional ratings for Growth, Value, Momentum, and Stability.
CTS Corporation (CTS)
CTS manufactures and sells sensors, actuators, and connectivity components in North America, Europe, and Asia. The company provides sensors and actuators, switches, temperature sensors, potentiometers, and fabricated piezoelectric materials and substrates.
On May 11, CTS declared a dividend of $0.04 per share, payable to shareholders on July 28, 2023. CTS pays an annual dividend of $0.16 per share, which translates to a 0.36% yield on the current share price. Its four-year average dividend yield is 0.51%.
CTS’ forward EV/Sales of 2.27x is 23.7% lower than the industry average of 2.98x. Its forward Price/Sales multiple of 2.34 is 17.7% lower than the industry average of 2.84.
CTS’ trailing-12-month ROCE, ROTC, and ROTA of 11.60%, 10.32%, and 7.72% are significantly higher than the 0.50%, 1.66%, and 0.02% industry averages, respectively. Its trailing-12-month net income margin of 9.86% is 399.6% higher than the 1.97% industry average.
For the fiscal first quarter that ended March 31, 2023, CTS’ net sales came in at $145.99 million, while its gross margin stood at $51.65 million. Its adjusted EBITDA for the same quarter came in at $31.90 million. Its cash and cash equivalents stood at $143.54 million, up 13.8% year-over-year.
Moreover, its total current liabilities came in at $105.78 million for the period that ended March 31, 2023, compared to $112.53 million for the period that ended December 31, 2022.
For the fiscal third quarter ending September 2023, Street expects CTS’ revenue and EPS to increase 1.3% and 2.2% year-over-year to $153.82 million and $0.63, respectively. For the fiscal year ending December 2024, its revenue and EPS are expected to grow 5.7% and 11.9% year-over-year to $632.76 million and $2.70, respectively.
The stock has gained 30.6% over the past year to close its last trading session at $44.36. Over the past six months, it has gained 14.7%.
It’s no surprise that CTS has an overall B rating, equating to Buy in our POWR Ratings system.
It has an A grade for Quality and a B for Momentum and Stability. It is ranked #4 in the same industry.
Beyond what we have highlighted above, we’ve also rated CTS for Growth, Value, and Sentiment. Get all CTS ratings here.
Bel Fuse Inc. (BELFB)
BELFB designs, manufactures, and markets a range of products that protect and connect electronic circuits, connectors, cable assemblies, discrete components, magnetics, and power supplies. It operates through three segments: Connectivity Solutions; Power Solutions and Protection; and Magnetic Solutions.
Last month, BELFB declared regular quarterly dividends of $0.06 and $0.07 per share on its class A and class B common shares, respectively. The dividends are payable to shareholders on August 1, 2023.
BELFB pays a $0.28 per share dividend annually, which translates to a 0.48% yield on the current share price. Its four-year average dividend yield is 1.81%.
BELFB’s forward non-GAAP P/E of 11.62x is 48.7% lower than the industry average of 22.66x. Its forward EV/EBIT multiple of 10.86 is 43.1% lower than the industry average of 19.08.
BELFB’s trailing-12-month ROCE, ROTC, and ROTA of 25.21%, 14.40%, and 10.83% are significantly higher than the industry averages of 0.50%, 1.66%, and 0.02%, respectively. Likewise, its net income margin of 9.02% is 356.9% higher than the industry average of 1.97%.
During the fiscal first quarter that ended March 31, 2023, BELFB’s net sales increased 26.1% year-over-year to $172.34 million, while its gross profit grew 57.3% from the prior-year quarter to $53.66 million. Its income from operations surged 142.8% from the year-ago value to $19.64 million.
Its non-GAAP net earnings came in at $18.84 million, representing a 272% increase year-over-year. Also, its adjusted EBITDA improved 141.7% from the year-ago value to $28.07 million.
Street expects BELFB’s revenue and EPS for the fiscal year ending December 2023 to increase 1.9% and 8.9% year-over-year to $666.59 million and $5.02, respectively. Furthermore, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.
BELFB’s shares have gained 281.7% over the past year to close the last trading session at $58.32. Over the past three months, it has gained 79.3%.
BELFB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Growth and Momentum. In the same industry, it is ranked first.
To see the BELFB’s other ratings (Stability and Quality), click here.
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DLB shares were trading at $83.72 per share on Tuesday morning, down $0.26 (-0.31%). Year-to-date, DLB has gained 19.45%, versus a 14.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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