3 dividend-paying tech stocks to buy in January

In the year The tech sector’s downturn in 2022 — driven primarily by inflation, rising interest rates and other nervy macro headwinds — has highlighted unstable profits, reasonable valuations and reliable dividend yields. Many speculative tech stocks that lacked those strengths quickly gave up their pandemic-era gains.

That was a painful learning experience for many investors, but it’s still not too late to add a few reliable profit-making technology stocks to your portfolio as the new year begins. I believe International business machines (IBM -0.12%), Texas Instruments (TXN 0.12%)And Cisco Systems (CSCO 0.29%) It could deliver consistent earnings through 2023 even as other high-growth tech stocks fall.

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1. IBM

IBM has developed anemic growth for years Kindergarten In the year in November 2021. But today, the “new” IBM looks more promising with long-term investments in expanding its high-growth cloud and artificial intelligence businesses.

Instead of going toe-to-toe on the public cloud giants Amazon And Microsoft, IBM is linking its open source services between public and private clouds to analyze all the data flowing in that “hybrid” space. That dynamic approach allows IBM to profit from cloud market growth — regardless of which company owns the largest cloud platform.

Analysts expect IBM’s revenue and earnings to grow 5% and 15%, respectively, in 2022 as the rising dollar slows its recent growth as the exit from Kundryl and its supply chain slows. They expect revenue and earnings to grow 1% and 6%, respectively, in 2023 as it fully divests from Kundryl and expands its high-growth businesses.

IBM expects to generate about $10 billion in free cash flow (FCF) by 2022, which should easily cover the $5.9 billion in dividends it paid out over the past 12 months. A dividend yield of 4.7% makes it one of the highest yielding blue chip tech stocks. S&P 500, and the stock still looks cheap at 15 times earnings. That high yield and low valuation should make it a great stock to own as the bear market progresses.

2. Texas Instruments

Texas Instruments manufactures a wide range of analog and embedded chips for consumer electronics, communications infrastructure, connected cars and industrial machinery. Most of its growth comes from the auto and industrial markets, and it has been spared from the post-pandemic slowdown in the PC market, which is hurting other chipmakers. Intel And Advanced Micro Devices.

Like Intel and AMD. As both manufacture advanced processors, TI sells inexpensive chips for many wireless and power management applications. Instead of increasing research and development spending to produce the best chips, TI is primarily focusing on improving its cost efficiency. TI’s ongoing transition from 200-millimeter to 300-millimeter Wi-Fi has reduced the cost of its bulk components by 40 percent. In addition, TI should receive subsidies and tax breaks from the recently passed CHIPS and SCIENCE Act because it manufactures most of its own chips in the United States.

TI’s gross margin and strong FCF growth have allowed it to buy nearly half of its stock over the past 18 years, driving annual profits for 19 consecutive years. It currently pays a 3% dividend yield and intends to invest all future FCF in buybacks and dividends.

Analysts They expect T’s revenue and earnings to grow 9 percent and 12 percent, respectively, in 2022. Growth is expected to slow as the auto and industrial markets recover from the pandemic. China, and other macro headwinds — but the stock still looks reasonably priced at 21 times earnings.

3. Cisco Systems

Cisco is the world’s largest supplier of network routers and switches. It also bundles its own cybersecurity services, other enterprise applications and communications tools into its own hardware. Cisco’s core hardware businesses operate in high-productivity markets, but it is expanding its high-growth software businesses to offset that slowdown. It has also frequently acquired smaller companies to expand that ecosystem and reduce its overall reliance on routers and switches.

Cisco’s growth has been hampered by supply chain disruptions and material shortages in the past year. But he has repeatedly assured investors that the market’s demand for products continues to outstrip supply — so growth should stabilize if supply chain issues are resolved.

For fiscal 2023, which ends in July, Cisco expects earnings to grow from 4.5 percent to 6.5 percent as adjusted earnings per share grow from 4 percent to 7 percent. It affirmed its guidance of 5% to 7% annual revenue growth over the long term. He attributes that optimism to the eventual resolution of supply chain challenges, campus and data center network upgrades, and expansion of its software and subscription services.

At 13 times earnings, Cisco stock still looks dirt cheap relative to its recent growth. It also pays an attractive 3.2% yield and has outperformed FCF over the past 12 months. .F.F.F.F.F.F.F.F.C.F. It’s not an exciting tech stock — but its consistent returns could make it a safe dividend to own in this unpredictable market.