Thursday, November 10, 2011

Value In Tech

There appears to be a bit of a revival in the tech industry with social media companies like LinkedIn Corp. (LNKD) and e-commerce companies like Groupon Inc. (GRPN) leading the way with blockbuster IPO's. It was just a decade ago that the giant tech bubble went bust and a lot of tech companies were left in the dust, along with the investors that put money in that bubble.

However, even with a small new tech bubble on the horizon there appears to be some value stocks in the tech space. A couple of once growth-oriented tech stocks have been making the long arduous journey to value stocks that pay a reliable and growing dividend. This is where I get interested.

Let's take a look:

Intel Corp. (INTC)

Intel is the world's largest chipmaker. Intel develops and manufactures microprocessors and sells them all over the globe.

Intel experienced huge growth from the mid-90's until late 2000 as the PC business exploded. This stock has since been range bound, bouncing between around $19 per share up to the mid-$20's for the last five years as its growth has been tempered. In those same five years, however, the dividend has grown from $0.11 per quarter in 2007 to $0.21 per quarter in 2011, almost doubling. Intel currently trades for a P/E ratio of 10.30 with very low debt. It has an entry yield of 3.52% based on current prices. It has grown dividends for 8 years, with a 5-year DGR of 14.5%. This looks like a solid value play on what once was a huge growth stock.

Microsoft Corporation (MSFT)

Microsoft develops the Windows PC operating system and MS Office software. It also produces the Xbox 360 game system console and other software. 

Microsoft sings a similar song to Intel. It had a huge run-up in the 90's and came crashing down with the rest of the tech bubble in late 2000. Since then, it's been in doldrums, trading in a range just below $30 for the last 10 years. The dividend story with this stock is still new, as it's been coming on strong with the dividend growth only lately. MSFT has grown dividends for 7 years, and has a 5-year DGR of 11.4%. The company has very little debt with a debt/equity ratio of 0.2. The stock has an entry yield of 3.05% based on current prices. This stock has definitely gone from a growth stock to a solid dividend-paying value stock. It currently trades for a P/E ratio of 9.51.

What about you? Do you see value in tech right now?

Full Disclosure: I'm long INTC.

Thanks for reading.

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