The tech industry is in a solid position due to accelerating digitalization, demand for cloud services, and adoption of AI technology across sectors. Hence, I think quality tech stocks Cisco Systems, Inc. (CSCO) and Jabil Inc. (JBL) might be ideal investments for solid returns. These stocks pay reliable dividends and might be worth adding to your long-term portfolio.
McKinsey & Company reported that the adoption of AI has more than doubled in the past five years. One of the most popular areas of AI is generative AI, with OpenAI’s ChatGPT being the latest standout. The chatbot has gained worldwide attention for its remarkable ability to perform tasks it has not explicitly learned.
The global AI solution market is expected to grow at a CAGR of 29.4%, reaching $301.20 billion by 2028.
The technology sector is also benefiting from the demand for cloud services, with the cloud initiatives expected to gain further momentum this year, offering organizations both business agility and cost savings. The cloud computing market is expected to grow at a robust CAGR of over 18.5% until 2030.
Moreover, organizations’ are investing in new digital business initiatives to enhance their capabilities, driving growth in the tech industry. Gartner’s latest forecast predicts that global IT spending will reach $4.60 trillion in 2023, a 5.1% increase from the previous year.
Take a look at the stocks mentioned above:
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry that include: infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On February 27, CSCO and T-Mobile US, Inc. (TMUS) announced plans to offer businesses CSCO Meraki’s first-ever 5G cellular gateways for fixed wireless access, the MG51 and MG51E.
Both companies have partnered to offer simplified, scalable, and reliable network-managed services powered by T-Mobile’s 5G network and the cloud-first Cisco Meraki platform, providing businesses with a way to create enriching and differentiated experiences for their customers.
On February 27, CSCO announced that it is working with Mercedes-Benz to provide an optimal mobile office experience in its new Mercedes-Benz E-Class vehicles.
This partnership will help people get work done safely, securely, and comfortably in their vehicles with the modern luxury and intuitive features that Mercedes-Benz and Webex customers are accustomed to.
Its trailing-12-month EBITDA margin of 29.74% is 165.1% higher than the 11.22% industry average. Its trailing-12-month gross profit margin of 61.92% is 26.5% higher than the 48.97% industry average. Its trailing-12-month net income margin of 21.26% is 628.8% higher than the 2.92% industry average.
On February 15, CSCO announced a quarterly dividend of $0.39 per share, payable on April 26, 2023.
CSCO pays $1.56 annually as dividends which translates to a yield of 3.18% at the current price. Its 4-year average dividend yield is 3.00%. Its dividend payouts have grown at 2.8% and 5.6% CAGRs over the past three and five years, respectively.
CSCO’s total revenue increased 6.9% year-over-year to $13.60 billion in the fiscal second quarter, which ended January 28, 2023. Its gross margin increased 4.7% year-over-year to $8.43 billion. Also, non-GAAP net income increased 2.9% year-over-year to $3.60 billion, while its non-GAAP EPS increased 4.8% year-over-year to $0.88.
CSCO’s revenue is expected to rise 11.9% year-over-year to $14.36 billion for the fiscal third quarter ending April 2023. The company’s EPS for the same quarter is expected to increase 11.3% year-over-year to $0.97. Additionally, the stock has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 13.3% over the past six months to close the last trading session at $49.06.
CSCO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CSCO also has an A grade for Quality and a B for Stability, Sentiment, and Momentum. It is ranked #3 out of 50 stocks in the B-rated Technology- Communication/Networking industry.
To access additional ratings for CSCO’s Value and Growth, click here.
Jabil Inc. (JBL)
JBL provides manufacturing services and solutions worldwide. It operates in two segments: Electronics Manufacturing Services and Diversified Manufacturing Services.
On March 6, JBL announced that its photonics business unit is expanding its design, manufacturing, and testing capabilities, culminating in the launching of a new Active Optical Cable family.
As a result, JBL is uniquely positioned to address the rapid pace of advancements in optics-enabled network and data center architectures while supporting the continuing surge of artificial intelligence, cloud, high-performance computing, and machine learning applications.
On January 18, JBL announced that its renowned optical design center in Jena, Germany, is currently demonstrating a prototype of a next-generation 3D camera with the ability to seamlessly operate in both indoor and outdoor environments up to a range of 20 meters. This should boost its prospects.
JBL’s trailing-12-month Return on Total Assets of 4.77% is 206% higher than the 1.56% industry average. Its trailing-12-month Asset Turnover Ratio of 1.81x is 200.3% higher than the 0.60x industry average.
JBL pays $0.32 annually as dividends which translates to a yield of 0.40% at the current price. Its 4-year average dividend yield is 0.75%. Additionally, JBL has paid dividends for 16 consecutive years.
During the fiscal first quarter that ended November 30, 2022, JBL’s net revenue increased 12.5% year-over-year to $9.64 billion, while non-GAAP core operating income increased 15.3% year-over-year to $461 million. Its gross profit increased 10.1% year-over-year to $743 million.
The company’s non-GAAP core earnings increased 12.3% year-over-year to $319 million, and non-GAAP core earnings per share increased 20.3% year-over-year to $2.31.
Street’s EPS estimate of $1.85 for the second quarter (ended February 2023) reflects a rise of 10% year-over-year. The company’s revenue estimate for the same quarter of $8.10 billion indicates a 7.3% improvement from the prior-year quarter. Additionally, JBL has topped consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 43.9% over the past year, closing the last trading session at $80.33.
It is no surprise that JBL has an overall rating of B, which equates to a Buy in our POWR Ratings system.
It has a grade of A for Momentum and a B for Quality. JBL is ranked #14 in the 81-stock Technology – Services industry.
In addition to the POWR ratings above, we have also rated JBL for Value, Growth, Stability, and Sentiment. Get all the JBL ratings here.
What To Do Next?
Get your hands on this special report:
The best part of the recent bear market is that there are thriving companies trading at tremendous discounts to fair value.
This combination of stellar earnings growth and low price provides a great catalyst for investor success.
And this report focuses on the 7 best of these stocks primed to soar in the weeks ahead. Click below to claim your copy now.
Want More Great Investing Ideas?
REVISED: 2023 Stock Market Outlook (includes top 7 picks)
Create a portfolio that fits YOUR goals. Try Magnifi Personal, free for 90 days.
CSCO shares were trading at $49.89 per share on Thursday afternoon, up $0.83 (+1.69%). Year-to-date, CSCO has gained 5.56%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|CSCO||Get Rating||Get Rating||Get Rating|
|JBL||Get Rating||Get Rating||Get Rating|
|TMUS||Get Rating||Get Rating||Get Rating|