3 high-yield tech stocks to buy in April

The past few months have been tough for high-growth technology stocks. Inflation and high interest rates made the sector’s top-priced “hyper-growth” stocks look much less attractive, and many investors took turns playing cheaper value.

However, investors should not dispose of all of their tech stocks recklessly. Instead, they should simply be more selective and focus on high-return tech stocks with steady dividends and low valuations instead.

Here are three solid companies that fit this description: Seagate Technology (STX -1.62% )And Qualcomm (QCOM 0.54% )And from Broadcom (AVGO 0.77% ).

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1. Seagate Technology

Seagate is the world’s largest manufacturer of disk-based hard disk drives (HDDs). Over the past few years, hard disk drives (HDDs) have faced a lot of competition from flash-based solid-state drives (SSDs), which are smaller, faster, more energy efficient, and less prone to damage.

Seagate competitor Western Digital (WDC 1.02% ) It expanded into first-party flash chips and solid-state drives to counter this secular trend. However, Seagate doubled down on its use of hard disk drives (HDDs) and focused on selling cheaper, higher-capacity drives to cost-conscious enterprise and data center customers instead.

This conservative strategy has enabled Seagate to achieve stable growth and an abundance of liquidity, which has mostly returned to its investors through repurchases and large profits. Seagate has reduced its stake count by 26% over the past five years, and has been in continuous profit for more than a decade.

Seagate pays a 3.3% forward dividend yield, and has been increasing its payout annually for three consecutive years. It only spent 43% of its free cash flow (FCF) on those payments over the past 12 months, giving it plenty of room for future increases.

Seagate is facing some supply chain challenges and a post-close slowdown in PC sales, but it’s offsetting those headwinds with strong growth for its cloud and data center businesses. As a result, analysts still expect its revenue and earnings to grow 12% and 58%, respectively, in fiscal year 2022 (which ends in July). These are impressive growth rates for a stock that is trading at just nine times forward earnings.

2. Qualcomm

Qualcomm is one of the largest producers of mobile baseband modems and System on Chips (SoCs), which conveniently combine CPU, GPU and modem in one package for smartphone makers. It also owns a huge set of wireless patents, which entitle it to acquire a portion of every smartphone sold around the world — even those who don’t use its chips.

Qualcomm’s stock has lost a quarter of its value this year as investors worry about slowing smartphone sales and other macroeconomic headwinds. However, this sale lowered Qualcomm’s forward P/E ratio to just 13 and boosted the forward dividend yield to around 2%.

Qualcomm has spent 41% of FCF on its dividend over the past 12 months, and has raised its dividend annually for nearly two decades. It has also reduced its stake by 24% over the past five years.

Investors may be concerned about Qualcomm’s near-term challenges, but the chip maker continues to increase its share of the premium smartphone market against its main competitor. Media Tech Because it returns most of the FCF franc (74% last year) to investors through buybacks and big profits.

Analysts still expect its revenue and earnings to grow 27% and 39% respectively this year, before calming down in 2023. Qualcomm has weathered a lot of cyclical downturns before, so I think it’s still a good time to accumulate more stakes. From this in favor of the chip maker.

3. Broadcom

Broadcom is often recognized as a major supplier of apple (AAPL 1.15% )That accounted for about 20% of its revenue last year. However, the company also produces a wide range of chips for the data center, networking, software, storage, and industrial markets. Additionally, it generates nearly a quarter of its revenue from infrastructure programs.

Today, formerly known as Avago Technologies, Broadcom is a Singapore-based chip manufacturer that acquired the original Broadcom and took over the brand in 2016. It has continued to grow both organically and through significant acquisitions — which included network switch manufacturer Brocade in 2016, software provider CA Technologies in 2018, and Symantec’s enterprise security business in 2019.

Between 2016 and 2021, Broadcom’s annual revenue grew at a compound annual growth rate (CAGR) of 15.7% as adjusted earnings per share (EPS) increased at a compound annual growth rate of 19.6%. Analysts expect its revenue and earnings per share to grow 16% and 27%, respectively, this year.

Those growth rates are impressive, but Broadcom is still trading at just 17 times forward earnings. It also pays a high dividend yield of 2.8%, and has been increasing its payout annually for more than a decade. The company has spent just 47% of its FCF on dividends over the past 12 months, and is still committed to spending about half of its previous FCF on dividends this year.

Broadcom’s shareholder-friendly business, well-diversified business, and low valuation make it a reliable investment in this volatile market.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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