The Dow, S&P 500, and the Nasdaq fell through late-afternoon trading Friday, with the tech-heavy Nasdaq down 1.9%. The downturn sets up a down week for the indexes as coronavirus setbacks pop up once again.
The week began on a sour note when Apple AAPL said it expects to fall short of its quarterly revenue guidance because of declines in both production and demand in China. The Chinese government then announced it would roll out new measures to help support businesses, as the deadly virus continues to hamper travel and business.
Meanwhile, gold prices rallied to near their seven-year highs and yields on the 10-year U.S. Treasury note fell to 1.46%. Even though money has been allocated to safe-havens recently, the S&P 500 hit another record high earlier in the week and the backdrop for stocks remains favorable.
Still, coronavirus worries look likely to hover over the market. So now might be time for investors to scoop up some dividend-paying stocks. And why not find high-yield dividend stocks from a growth sector such as tech.
Seagate Technology PLC STX
Seagate is a data storage firm with a $14 billion market cap and its offerings range from hard disk drives to solid state drives and more. The Cupertino, California-based company sells storage solutions for both businesses and consumers and STX executives expect to benefit from the “ongoing demand for mass capacity storage.” STX topped our Q2 fiscal 2020 earnings estimates in early February and its bottom-line estimates have climbed since then to help it earn a Zacks Rank #2 (Buy).
Our current Zacks estimates call for Seagate’s adjusted earnings to climb 5% and 10.4%, respectively in fiscal 2020 and 2021, with its sales set to expand at a slower pace. Seagate has also consistently traded at a discount against its industry over the last five years and it currently trades at 10.1X forward 12-month earnings estimates, compared to its industry’s 14.3X. And STX has traded as high as 12.7X during the past year and it holds an “A” grade for Value in our Style Scores system.
Shares of Seagate have climbed 15% in the last year, but currently hover 15% below their 52-week highs, which might set up a better buying opportunity for those high on the stock. On top of that, its annualized dividend of $2.60 a share yields 4.75% right now. This easily tops fellow storage solutions firm Western Digital’s WDC solid 2.90%. The firm also returns value to shareholders through buybacks and its Computer- Storage Devices industry rests in the top 9% of our more than 250 Zacks industries.
Broadcom Inc. AVGO
Broadcom is a semiconductor firm that has recently expanded into infrastructure software solutions through acquisitions. This includes its nearly $19 billion purchase of CA Technologies and Symantec’s enterprise software unit. Broadcom posted stronger-than-expected Q4 2019 results in December and CEO Hock Tan said that its core semiconductor business “is bottoming and will return to year over year growth in the second half.”
AVGO looks poised to grow as part of an industry-wide semiconductor comeback after a downturn in sales in 2019. Our estimates call for Broadcom’s 2020 revenues to surge 10.7%, with 2021 expected to jump another 6% higher to $26.49 billion. At the bottom end, the firm’s adjusted earnings are set to pop 9% and 10%, respectively, during this stretch.
Sticking with today’s theme, Broadcom’s dividend yields 4.20% right now. This payout crushes Nvidia’s NVDA 0.21%, chip giants Intel’s INTC 2.02% and Texas Instruments’ TXN 2.74%. AVGO’s dividend yield is not inflated by a falling stock price. In fact, AVGO stock, which holds a Zacks Rank #2 (Buy), has surged 170% in the last five years and it trades at a discount compared to its industry’s average at the moment.
NetEase, Inc. NTES
NetEase is a leading Chinese video game developer that has expanded into international markets such as Japan and North America. Online games continue to drive sales and the firm has partnerships with fellow industry giants such as Blizzard Entertainment ATVI to launch games for the massive Chinese market. Investors should note that the global gaming industry is set to soar to roughly $200 billion by 2022, up from $152 billion last year, and China, the U.S., and Japan are the three largest markets.
Along with its gaming business, NetEase is focused on growing its e-commerce unit, online education services, and digital music segment, which includes an investment from Alibaba BABA. NetEase’s strong Q3 earnings saw executives raise its dividend. NTES’ current yield rests at an impressive 4.73%. The company’s fiscal 2019 and 2020 consensus earnings estimates have surged to help it hold a Zacks Rank #1 (Strong Buy) heading into the release of its Q4 results on February 26.
Despite coronavirus fears, the Beijing-based company is up over 12% in 2020 to easily outpace the S&P 500’s 5% climb. NTES shares are now up 55% in the last year. NTES also trades at a discount against its industry—which rests in the top 17% of our over 250 Zacks industries—in terms of forward 12-month Zacks earnings and sales estimates.
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