3 Dividend Tech Stocks Under $10 with Yields Over 2%

NYSE: HPE | Hewlett Packard Enterprise Company News, Ratings, and Charts

HPE – 5G and cloud computing will most likely be the primary drivers of future tech performance. Hewlett Packard (HPE), United Microelectronics (UMC), and ASE Technology (ASX) are three tech-stocks that stand out due to their low prices and dividend yields.

The tech-heavy Nasdaq Composite snapped a four-day losing streaks to gain 1.7% on Tuesday. The recovery followed an upbeat assessment of the US economic recovery by Federal Reserve leaders. However, the economic fallout and the upcoming election have exacerbated the inevitable market volatility, making investors apprehensive about their portfolios.

During unpredictable movements in the markets, dividend income provides a cushion against capital losses. Hence, high dividend-paying tech stocks appear a solid investment now. That’s due to fast growing areas such as 5G and cloud computing that should keep tech stocks thriving.

Hewlett Packard Enterprise Company (HPE), United Microelectronics Corporation (UMC), and ASE Technology Holding Co., Ltd. (ASX) are low-priced tech stocks that could provide a steady source of dividend income. These three stocks also hold immense price appreciation potential.

Hewlett Packard Enterprise Company (HPE)

HPE is a global edge-to-cloud Platform-as-a-Service (PaaS) company. It is transforming businesses by helping them connect, protect, analyze, and act on their data and applications from edge to cloud. It operates as a subsidiary of Hewlett-Packard Company.

HPE has lost 39% year-to-date to close yesterday’s trading session at $9.31. However, the stock has recovered nearly 8% since its March low.

HPE pays an annual dividend of $0.48, which translates into a yield of 5.20%. The company has a four-year average dividend yield of 2.43%. Over the past three years, the average dividend per share growth rate for HPE was 38.5% per year. The company pays quarterly dividends and has been consistently increasing its dividend each year. The most recent payout was a cash dividend of $0.12, payable in October 2020.

HPE witnessed strong execution and sequential growth in its fiscal third quarter that ended in July 2020. The company generated free cash flow of $924 million, improving 43% year-over-year. It also reported $1.47 billion as cash flow from operations, a 23% increase compared to the year-ago quarter. The company returned $154 million back to its shareholders in the form of dividends.

HPE also delivered a top-line of $6.8 billion, increasing 13% year-over-year. The company gained momentum in key areas of differentiation and accelerated its as-a-service pivot with strong Annualized revenue run-rate (ARR) growth and a record number of HPE GreenLake services orders. ARR for the quarter came in at $528 million, up 11% from the prior-year period.

The company reported an EPS of $0.01 for the quarter, significantly improving from the year-ago loss of $0.02. HPE has recently completed the acquisition of Silver Peak, an SD-WAN (Software-Defined Wide Area Network) leader. The deal creates a comprehensive networking portfolio to accelerate customers’ edge-to-cloud transformation. The street expects EPS to grow 11.4% next year. As per our POWR Ratings, HPE has a grade a “B” in Industry Rank.

United Microelectronics Corporation (UMC)

UMC operates as a semiconductor wafer foundry in Taiwan, United States, and internationally. It provides circuit design, mask tooling, wafer fabrication, and assembly and testing services for applications to serve every major sector of the electronics industry. The company functions through two segments – Wafer Fabrication and New Business.

UMC closed yesterday’s trading session at $4.29, gaining more than 65% year-to-date. The stock is trading at an 8.5% discount to its all-time high of $4.69. Additionally, the stock is up more than 105% over the past six months.

While the four-year average dividend yield for UMC is 4.44%, the current annual dividend of $0.14 translates to a 2.34% yield. The stock has been consistently paying an annual dividend since 2005. The most recent dividend declared by the company was $0.1365 during the second quarter. UMC has grown its dividend at a CAGR of 124% over the past five years.

UMC generated a free cash flow of $2 billion in the last reported quarter. It also reported $2.8 billion in cash flow from operations. The top-line improved 29% year-over-year to $1.5 billion as the utilization rate increased to 98% during the quarter. The operating margin reached 13.2%. UMC also received the Texas Instruments (TI) 2019 Supplier Excellence Award for its exceptional assurance of supply and quality during the quarter.

UMC lifted its Wafer shipments to 2.22 million during the quarter. The increase mainly reflected computing segment demand for connectivity, display driver and flash controller as well as inventory replenishment in computing markets. However, the communication application segment contributed the maximum revenue (51%).

EPS for the quarter came in $0.09, beating the consensus estimate by 80%. The current demand for UMC’s products remains strong. The company is moving new 28nm products into volume production for wireless applications such as 4G and 5G smartphones. Hence, the street anticipates EPS to grow 2.6% per year over the next five years.

UMC’s POWR Ratings reflect a promising outlook. It has an overall rating of “Buy” with a grade of “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. Among the 86 stocks in the Semiconductor & Wireless Chip industry, it’s ranked #18.

ASE Technology Holding Co., Ltd. (ASX)

ASX provides semiconductor packaging and testing services in the United States, Taiwan, Asia, and internationally. The company develops and offers complete turnkey solutions covering front-end engineering test, wafer probing and final test, as well as IC packaging, materials and electronic manufacturing services. It operates through Packaging, Testing, and Electronic Manufacturing Services (EMS) segments.

ASX closed yesterday’s trading session at $4.15, which is 27% lower than its 52-week high of $5.70. The stock has gained more than 18% in the last six months.

ASX pays an annual dividend of $0.14, which translates into a dividend yield of 2.14%. The four-year average dividend yield for the company is 1.94%. The last dividend announced by the company was $0.1363 in August 2020. ASX delivered a free cash flow of $845 million in its second quarter that ended in June. It also generated $1.34 billion in cash from operating activities. Moreover, the Anti-Monopoly Bureau had lifted the restrictive conditions on the joint establishment of ASX and Siliconware Precision Industries Co., Ltd. (SPIL) earlier this year.

With political tensions in China, ASX has emerged as one of the top exporters of semiconductors and related equipment to western countries at a lower cost. The top-line increased 19% year-over-year to $7.2 billion. The packaging operations segment contributed 50% to the total revenue. ASX’s top 10 customers contributed nearly 61% of its total net revenues during the quarter.

The EPS for the quarter came in at $0.11, beating the consensus estimate by 22.2%. ASX stands to gain significantly from the 5G boom, as the demand for semiconductors, an essential item in the network towers, is continuously increasing. The consensus EPS estimate for the current year indicates an increase of 36% from the year-ago value.

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HPE shares were trading at $9.23 per share on Wednesday afternoon, down $0.08 (-0.86%). Year-to-date, HPE has declined -39.80%, versus a 3.30% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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