• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

3 Reasonably-Priced Chip Stocks That Pay Healthy Dividends

A number of quality chip companies now sport dividends above 2%. Here's a look at a few of them.
By ERIC JHONSA
Oct 4, 2018 Updated Oct 06, 2018 | 01:59 PM EDT
Stocks quotes in this article: STX, AVGO, CY, KLAC

As chip stocks have sold off, dividend yields for many companies in the group have risen considerably.

Excluding data center REITs that are required to pay out at least 90% of their taxable income via dividends, chip stocks now appear to account for a majority of the tech companies sporting dividend yields north of 2%. And while some of the other tech names that fit the description face major top-line challenges -- for example, Seagate (STX) , which carries a 5.4% yield but whose core hard drive business is getting hurt by solid-state drive (SSD) cannibalization -- many of the chip names that pay large dividends look well-positioned to deliver moderate growth over the next few years.

Here are a few chip names for yield-chasing investors to consider.

1. Broadcom

Dividend Yield: 2.8%

Valuation: Broadcom (AVGO) trades for 11 times a fiscal 2019 (Oct. 2019) EPS consensus of $21.76.

What's to Like: Broadcom, now a well-diversified chip and hardware giant, has committed to returning 50% of the prior year's free cash flow (FCF) via dividends, and has forecast "another substantial increase in [its] quarterly dividend for calendar 2019." Though some of the company's end-markets (for example, set-top boxes and enterprise data center hardware) are likely to see limited long-term growth, others, such as cloud data center hardware and smartphone RF subsystems, should see healthier growth.

In addition, strong financial execution should allow Broadcom's earnings growth to keep exceeding its revenue growth. It also offers a reason to be cautiously optimistic that Broadcom will manage to make its surprising $18.9 billion deal to buy enterprise software firm CA Technologies pay off.

2. Cypress Semiconductor

Dividend Yield: 3.1%

Valuation: Cypress Semiconductor (CY) trades for 9.7 times a 2019 EPS consensus of $1.47.

What's to Like: While there's some risk that softer memory prices and inventory corrections could weigh on Cypress in the near-term, its large microcontroller (MCU) business should continue benefiting over the long run from its strong exposure to growing auto and industrial chip markets. The company also has a booming Wi-Fi/Bluetooth connectivity chip business that has market-leading positions in both the automotive and IoT Wi-Fi markets.

And considering how many other MCU firms have been bought out over the last few years, it wouldn't exactly be shocking if Cypress became a buyout target as well.

3. KLA-Tencor

Dividend Yield: 3%

Valuation: KLA-Tencor (KLAC) trades for 11.4 times a fiscal 2019 (ends in June 2019) EPS consensus of $8.88.

What's to Like: Judging by the results and guidance it delivered in July, KLA-Tencor is holding up better than many chip equipment peers during a recent dip in orders from memory makers and chip contract manufacturers (foundries).

There's still a chance that near-term estimates will come down a bit as some large memory makers cut back on their spending, but the capital-intensity of newer memory and logic manufacturing processes, along with their considerable need for the types of metrology and chip wafer inspection tools that KLA provides, will work in the company's favor in the coming years. So should (provide trade tensions don't get in the way) KLA's exposure to Chinese wafer fab buildouts.

(Editor's Pick. Originally ran Oct. 4.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Stocks | Technology | U.S. Equity

More from Technology

Tech Gives Push to Market's Rotation

James "Rev Shark" DePorre
Jan 20, 2021 4:49 PM EST

Money moved back into big-cap technology names, thanks to strong positive reactions to earnings from Netflix.

Netflix's Post-Earnings Surge Might Bode Well for Microsoft, Facebook and Amazon

Eric Jhonsa
Jan 20, 2021 2:40 PM EST

The streaming giant's numbers and commentary were arguably just good, rather than amazing. But with its stock having underperformed for months, that's all that markets needed.

Nano Dimension's Cash Raising Could Lead to Some Intriguing Scenarios

Timothy Collins
Jan 19, 2021 12:15 PM EST

In four months, NNDM will have raised $1 billion in cash.

Cybersecurity Stocks that Lagged in 2020 Could Get Boost from SolarWinds Hack

Eric Jhonsa
Jan 16, 2021 8:00 AM EST

The hack stands to drive an uptick in corporate and government spending to protect both on-premise and cloud assets.

I Find Draganfly's Connection to American Airlines Intriguing

Timothy Collins
Jan 15, 2021 12:29 PM EST

Drones are set to become a bigger and bigger part of the commercial world and our day-to-day lives.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:35 AM EST GARY BERMAN

    Thursday Morning Fibocall for 1/21/2021

    SPX (Long-Term View) The 1/20/21 NEW high @ 3859...
  • 11:38 AM EST CHRIS VERSACE

    Best Stocks to Buy for the Biden Presidency

    President-elect Biden's massive stimulus plan, int...
  • 08:07 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 1/20/2021

    SPX (Long-Term View) The 1/8/21 high @ 3826.69 i...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login