According to the latest CNBC Technology Executive Council survey, 74% of tech executives believe their companies will spend more on new technology in the next 12 months. The global information technology market is expected to grow at a CAGR of 8.8% to reach $13,092.49 billion in 2026.
While the slowed demand and rising borrowing costs might keep the industry under pressure in the near term, the growing demand for advanced tech solutions and rising investments should help quality tech stocks witness big rebounds in the long run.
Therefore, it could be wise to buy fundamentally strong tech stocks Microsoft Corporation (MSFT), Dell Technologies Inc. (DELL), and CTS Corporation (CTS) and hold them for an extended period. In addition to capital gains, the impressive dividend history of these companies should help generate a steady income stream.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
Over the last three years, MSFT’s dividend payouts have grown at a 10.4% CAGR. Its four-year average dividend yield is 1.04%, and its forward annual dividend of $2.72 per share translates to a 1.16% yield. It is expected to pay a quarterly dividend of $0.68 per share on March 9, 2023.
On December 14, 2022, MSFT and Viasat (VSAT) announced a new partnership to help deliver internet access to 10 million people around the globe, including 5 million across Africa.
MSFT’s VP of Technology and Corporate Responsibility, Teresa Hutson, said, "Working with Viasat, we will use satellite to reach remote areas that previously have had few, if any, options for conventional connectivity. Together, we will be able to rapidly scale and expand Airband's reach, exploring a wider pipeline of projects and new countries where we haven't yet worked."
For the quarter ended September 30, 2022, MSFT’s total revenues increased 10.6% year-over-year to $50.12 billion. The company’s operating income increased 6.3% from the prior-year period to $21.52 billion. Its adjusted net income increased 2% year-over-year to $17.56 billion. Also, its adjusted EPS came in at $2.35, representing an increase of 3.5% year-over-year. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.
MSFT’s EPS for the quarter ending March 31, 2023, is expected to increase 5.8% year-over-year to $2.35. Its revenue for the quarter ending December 31, 2022, is expected to increase 2.8% year-over-year to $53.19 billion.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has fallen 3% over the past month to close the last trading session at $234.53.
MSFT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Software - Business industry, it is ranked #9 out of 53 stocks. The company has a B grade for Stability, Sentiment, and Quality.
Click here to see the additional ratings of MSFT for Growth, Value, and Momentum.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services worldwide. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
Its four-year average dividend yield is 0.27%, and its trailing twelve months dividend of $0.99 per share translates to a 2.55% yield. It is expected to pay a quarterly dividend of $0.33 per share on February 3, 2023.
On November 30, 2022, OneMind Technologies, a wholly-owned subsidiary of Affluence Corporation, announced its strategic partnership with DELL. Global VP of Digital Cities for DELL, Ferry Chung, aims to develop expertise in solving specific problems, bring proven solutions with modern architectures and ensure successful implementations through this partnership.
DELL’s non-GAAP operating income for the fiscal third quarter ended October 28, 2022, increased 21.7% year-over-year to $2.38 billion. The company’s non-GAAP net income increased 29.9% year-over-year to $1.71 billion. Additionally, its non-GAAP EPS came in at $2.30, representing a 38.6% increase from the year-ago period.
DELL's EPS for fiscal 2023 is expected to increase 20% year-over-year to $7.47. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 9.8% over the past three months to close the last trading session at $38.76.
DELL’s strong outlook is reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy. It is ranked #13 out of 44 stocks in the Technology - Hardware industry. In addition, it has a B grade for Growth, Value, and Sentiment.
Click here to see the additional ratings of DELL for Momentum, Stability, and Quality.
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.
CTS’ four-year average dividend yield is 0.53%, and its forward annual dividend of $0.16 per share translates to a 0.41% yield. It is expected to pay a quarterly dividend of $0.04 per share on January 13, 2023.
CTS’ net sales for the third quarter ended September 30, 2022, increased 24.1% year-over-year to $151.91 million. The company’s adjusted net earnings increased 32% to $19.8 million. Its adjusted EBITDA increased 27.1% to $33.8 million, while its adjusted EPS came in at $0.62, representing a 34.8% increase from the prior-year quarter.
CTS’ EPS and revenue for the quarter ending December 31, 2022, are expected to increase 16.8% and 11.3% to $0.57 and $147.44 million, respectively. Over the past six months, the stock has gained 13.3% to close the last trading session at $38.75.
CTS’ strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy in our proprietary rating system. It is ranked #6 out of 43 stocks in the Technology - Electronics industry. In addition, it has an A grade for Quality and a B for Growth.
Click here to see the other ratings of CTS for Value, Momentum, and Stability.
MSFT shares were trading at $240.94 per share on Thursday afternoon, up $6.41 (+2.73%). Year-to-date, MSFT has declined -27.69%, versus a -17.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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