Tech stocks have been among the worst performers in 2022 so far. The Zacks computer and technology sector has plunged 29% year-to-date (YTD), while the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 indices have fallen 12.6%, 24 .2% and 17.2%, respectively.
The sector suffers from inflationary pressures, higher wages and currency fluctuations. Disruptions in the supply chain due to a severe shortage of chips and several other components are affecting the profitability of companies in the space. Additionally, the ongoing war between Russia and Ukraine has heightened investor concerns about the short-term prospects of tech companies.
Businesses are postponing major IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. In July 2022, Gartner lowered its forecast for global IT spending growth rate to 3%, from the previously mentioned 4%. The research firm’s report highlights that IT spending growth in 2022 will be much slower than in 2021 due to reduced spending in the areas of devices, software, IT services and communication services.
The aforementioned challenges are expected to persist in the near term, which will negatively impact the overall financial performance of the majority of technology stocks. But does that mean investors interested in tech stocks should avoid investing in space?
We believe that amid the current macro headwinds and highly volatile market scenario, investing in high-quality, dividend-paying tech stocks like –Texas Instruments Incorporated (TXN – free report), ASE Technology Holding Co., Ltd. (ASX – free report) and Vishay Intertechnology, Inc. (VSH – Free report) – could earn you some nice returns.
A stock with a history of increasing dividends is considered healthy and provides an opportunity for capital appreciation regardless of stock market movements. Dividend growth stocks generally act as a hedge against economic uncertainty and provide downside protection with steadily increasing payouts.
Choosing the Right Dividend Stocks
We ran the Zacks Stocks Screener to identify stocks that have a dividend yield above 2% with a five-year historical dividend growth of over 0.1%. Additionally, we narrowed our search by considering stocks with a Zacks #2 (buy) rating and a dividend payout ratio below 60%. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s discuss the aforementioned tech stocks in detail:
Texas Instruments is an original equipment manufacturer of analog integrated circuits, mixed-signal and digital signal processing (DSP). The company is benefiting from a solid rebound in the automotive market.
The strong demand environment in the industrial, communication equipment and enterprise systems markets is a major strength. In addition, the strong momentum of the analog segment, thanks to the robustness of the signal chain and the power supply product lines, is making a good contribution to revenue. Additionally, the robust embedded processing segment is doing well.
The stock has a dividend yield of 2.77% and a historical five-year dividend growth of 17.38%. Additionally, TXN’s payout ratio is currently 50% of earnings. View Texas Instruments’ dividend history here.
ASE technology is a provider of semiconductor manufacturing services in the areas of assembly and testing. The company develops and offers complete turnkey solutions covering front-end engineering testing, wafer testing and final testing as well as integrated circuit packaging, materials and electronic manufacturing services.
ASE Technology has benefited from the growing demand for multi-die and co-packaging platforms. It recently unveiled an advanced packaging platform ViPack to enable vertically integrated packaging solutions. The launch of VIPack is positive as it represents ASE’s next-generation 3D heterogeneous integration architecture that extends design rules and achieves ultra-high density and performance.
Strong demand for traditional electronics manufacturing services and System-in-Package services is contributing well to revenue growth. Additionally, ASX’s ability to meet reliable, high-volume business needs is remarkable.
The company has a dividend yield of 6.31% and a five-year annualized dividend growth of 10.52%. Its payout ratio is 29% of profits. View ASE Technology’s dividend history here.
Vishay Intertechnology is a global manufacturer and supplier of semiconductors and passive components. The Company’s products include metal oxide semiconductor field effect transistors (MOSFETs), diodes and optoelectronic components.
Vishay Intertechnology regularly benefits from its robust product lines of resistors, diodes, capacitors, inductors and optoelectronics. In addition, a recovery in the automotive sector and strong momentum in the industrial, telecommunications and power supply markets are driving sales.
Moreover, the strong magnetism of Vishay Intertechnology is the continuous engine of the specialized activity. Additionally, the growing momentum in the fields of power transmission and electric cars using heavy-duty capacitors is a tailwind. Additionally, VSH’s focus on expanding its manufacturing capabilities remains a major driver.
VSH has a dividend yield of 2.1% and a five-year annualized dividend growth of 8.12%. In addition, the company’s payout ratio is currently 14% of earnings. View Vishay Intertechnology’s dividend history here.