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My Favorite Tech Dividend Stocks

Written by Briton Ryle
Posted November 2, 2015

I basically missed Halloween this year because I was flying back to Baltimore from the Toronto MoneyShow. I hadn't been to Toronto in 25 years, and I look forward to getting back for next year's MoneyShow conference, because Toronto is really an amazing city.

Over the past year, I also presented at conferences in Orlando and San Francisco. Over the next 12 months, I plan to present at these conferences again, and I will probably add New Orleans, because New Orleans is a great town.

If you've never been to a MoneyShow conference, you should definitely plan to attend at least once. They always have a great lineup of speakers.

Today, I thought I'd share the presentation I gave in Toronto with you. (You'll have to imagine each point as a separate PowerPoint slide.)

Tech Dividends

For best results, start with either a great company or a great trend. At The Wealth Advisory, we've got great companies like Starbucks (+177%), Realty Income Trust (+172%), and Boeing (+152%)...

And great trends like biotech (88%, 42%, and 28%), Internet data (72%), and solar (56%).

Power of Dividends

power of dividends
Over the last 100 years, more than 80% of all stock market gains have come from dividends.

If you put $5,000 into a $50 stock that pays 8% a year and you held it for 20 years, your investment would be worth $24,377.

That's a 487% gain. Not bad...

That same $5K in a stock that pays just 3% — but grows that payment at 20% a year — would be worth $4,055,388 after 20 years.

That’s a phenomenal 81,327% gain.

There are two things we can conclude here:

  1. You can grow your wealth and provide yourself a comfortable retirement.
  2. The real secret to building wealth is uncovering stocks that will grow their dividends each and every year.

Wall Street loves to sell the idea that only its professional money managers can generate returns like this, but that's simply not true.

The tools are available for every individual investor to do just as well — if not better — than the "pros" on Wall Street.

So how do you find the stocks that will reliably grow your wealth in the years to come?

SPX sector performance

For our purposes today, we will look at dividend growth in technology stocks. Tech stocks have an ideal mix of stability and growth.

Two Dividend Tech Stocks

In the 1990s, 1 billion people connected to the Internet with desktop computers and laptops. Between 2001 and 2010, another 2 billion people connected to the Internet with mobile phones.

This year, Cisco Systems says 25 billion Internet-enabled things will be connected to the Internet and to each other. In the next five years, that number will double again to 50 billion and comprise 50 trillion gigabytes of data.

Juniper Networks (NYSE: JNPR)

Current Price: $31.30
Recommended Price: $23.50
Market Cap: $12 billion
Shares Outstanding: 426 million
52-Week Range: $20.13 - $31.83
Dividend: 1.3%
Price Target: $38

jnpr

Juniper is often considered a smaller version of Cisco Systems. Juniper sells routing and switching gear to corporations. In addition to the routers and switches that direct traffic on the Internet, the company also provides software, tech support, and training.

But that comparison to Cisco is not exactly accurate. For one, Juniper has a less-diversified product line. Roughly 50% of sales come from routers, and that segment makes up just 17% of Cisco sales.

Anecdotal evidence suggests Juniper is doing better than Cisco in the Internet of Things (IoT) space. Juniper is more aligned with the open-source movement, allowing its switching software to run on any router. Cisco has resisted this.

And Juniper also has more exposure to the mobile computing space, which may be very important.

Juniper has $2 billion in cash and long-term debt of $1.95 billion. It is also buying back shares. It bought back nearly $2 billion in shares last year and is expected to retire another $1.4 billion this year. That’s substantial for a $10 billion company.

Verizon is Juniper’s biggest customer. On January 22, Verizon announced it was increasing its 2015 CAPEX budget from $17 billion to $18 billion. Overall, carrier spending is expected to be flat in 2015 at $208 billion.

Juniper got an upgrade from Bank of America, who raised it from “Neutral” to “Buy” and raised the price target from $27 to $34...

In June, Wedbush raised its rating on Juniper to “Outperform” with a $32 target.

Wedbush said it anticipates “a return to more-than-20% year-over-year earnings-per-share growth and an improved free-cash-flow profile in second-half 2015 to 2016.”

I view Juniper Networks as a solid play on increased CAPEX spending and mobile carrier network upgrades. My buy-under price is $27, and my 12-month price target is $38.

Nokia (NYSE: NOK)

Current Price: $7.45
Market Cap: $27 billion
Revenue: $13.5 billion
Shares Outstanding: 3.65 billion
52-Week Range: $5.71 – $8.44
Dividend: 2.1%
Price Target: $12.50

nok

The renewed focus on networks has given Nokia around $15 billion in revenue over the last couple of years and, more importantly, returned the company to profitability in 2014. It currently trades with a reasonable trailing P/E of 9. It is the number three wireless infrastructure company, behind leaders Ericsson and Huawei.

Nokia recently announced a deal to acquire Alcatel-Lucent’s (NYSE: ALU) wireless business that will vault it to the number one wireless infrastructure company and give it a very valuable patent portfolio.

Right now, Nokia’s main U.S. customer is T-Mobile (NASDAQ: TMUS), and it just started supplying Sprint (NYSE: S). Alcatel-Lucent is a major supplier to AT&T (NYSE: T) and Verizon (NYSE: VZ).

Early estimates are that the deal would add approximately $1 billion to Nokia’s 2016 revenue, pushing it from $15.8 to $16.8 billion.

The impact to earnings might be as much as $0.10 per share, or about 25%.

I rate Nokia a strong buy below $8.50. My 12-month price target is $12.

Until next time,

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.

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