Three Semiconductors That Pay Big Dividends
Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Those of you who have read my previous articles probably know that I’m a big fan of dividends. Dividends can play an important role in your portfolio, no matter your stage of life. I am at the beginning of my investing life with a long time to go until retirement, but I love dividends; a retiree will love dividends too as they provide the necessary income. Finding a good mix of potential growth and dividends is a tough task, but it’s one that I think the semiconductor industry helps us solve.
I did a screen for semiconductor companies that have a 4% dividend yield, and then I started narrowing down from there. There are three excellent semiconductor companies that I believe would be great in any dividend investor’s portfolio. I feel that these stocks will appreciate over time providing both excellent growth and a great dividend to all investors who buy and hold them.
You had to figure that the world’s largest microprocessor manufacturer would be in here. Intel (NASDAQ: INTC) has had many years of excellent growth and is currently the firm to beat in the microprocessor space. With a current dividend yield of 4.37% and a P/E of 9.66 I don’t see any reason to pass up this juggernaut of the semiconductor space. Over the next few years Intel is expected to gain around 5% a year in terms of EPS; the stock also has a one-year target price of around $23.50, depending on the analyst that you have. At today’s levels, $23.50 would represent a very reasonable gain, especially when you throw in the 4.37% yield.
In the spirit of sticking with the larger companies out there, I managed to find STMicroelectronics NV (NYSE: STM). This company is based out of Switzerland and supplies the components that you’ll see in Nokia cell phones. The dividend at STM is currently yielding 4.4%, and that’s on a P/E ratio of 10.68. As this company has been experiencing some losses as of late due to a failing wireless segment, you should see some resurgence through 2014/2015, around the time that STM will drop their wireless division.
United Microelectronics Group (NYSE: UMC) isn’t the largest in their respective category, but they do have the largest dividend yield out of the bunch. The company operates through wafer production and distributes its products around the world. The company is currently trading at 17 times earnings, but it brings with it a monstrous 4.59% yield. Some things I like about UMC include the fact that it is pretty small with a $4.5 billion market cap and that it could take off if more institutions pick up on it, as it only has 8% institutional holding.
Intel and STM both have five star CAPS picks while UMC has four stars. All three companies are highly regarded by analysts, for the most part.
After the down trending we have been seeing in the markets as of late due to things like the Italian election, I’d like to think that now is a good time to get in on any of these three companies. My recommendation is a long position for the long term. Hold these companies, reap the dividends and watch your portfolio grow from the growth of these semiconductor companies.
Ash1402 has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!