Five Dividend-paying Cloud Stocks to Purchase Prior to Sector Rebound

Five dividend-paying cloud stocks to purchase prior to the sector’s rebound include companies currently trading off their recent highs as investors rotated their holdings from growth toward value investing.

The five dividend-paying cloud stocks to purchase after a recent slide in technology sector share prices feature companies that still are showing strong growth. But the five dividend-paying cloud stocks to purchase pulled back when many investors shifted toward seemingly undervalued sectors.

The retreat in share prices is offering investors who want to buy cloud stocks a chance to do so at a discount compared to just a few months ago, even though the financial fundamentals of such businesses have hardly changed. Despite the recent slide of technology stocks, the sales growth of cloud companies — offering software and services on the internet instead of locally on one’s computer — have avoided steep plunges.

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Marvell Technology Group Gains Place Among Five Dividend-paying Cloud Stocks to Purchase

Dividend-paying Marvell Technology Group Ltd. (NASDAQ:MRVL) received a buy rating from BoA Global Research, along with a $60 price objective. That valuation is supported by potential 33% longer-term compounded annual earnings per share growth and driven by potential success in 5G during the next several years. The stock’s valuation is in line with its semiconductor peers at early stages of new product cycles, BoA added.

Downside threats for MRVL include: 1) integration risks in recent acquisitions, 2) financial risks related to going to net debt from net cash positions and in achieving expected cost synergies on a timely basis, and 3) cyclical industry risks such as a potential slowdown in legacy hard disk drive and storage assets, 4) competitive risks against larger rivals such as AVGO, INTC and NVDA.

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Five Dividend-paying Cloud Stocks to Purchase Include a Company Providing Disk Drives

“Cloud stocks have been hot,” said Bob Carlson, who chairs the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. “It’s tough to avoid paying too much for them.”

An alternative is to buy shares of a company that provides key materials, such as disk drives, for use by cloud companies. The companies that provide cloud services need disk drives for their infrastructure.

“A good choice is hard-disk maker Seagate Technology (NASDAQ:STX),” Carlson told me. “In fact, it is the only pure play left among disk drive makers.”

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Seagate, of Fremont, California, offers a 2.8% dividend yield and has been manufacturing hard disk drives for more than 40 years. After a 47% rise so far in 2021, the stock still sells at only 14 times analysts’ consensus earnings estimates for the next 12 months, continued Carlson, who also heads the Retirement Watch investment newsletter.

Pension fund and Retirement Watch leader Bob Carlson answers questions from Paul Dykewicz before COVID-19 social distancing took effect.

Five Dividend-paying Cloud Stocks to Purchase Feature a Money Manager’s Favorites

The cloud is widely in use and its revenues keep rising by double-digit percentages annually. For investors eyeing high-impact investment that reflects future data patterns, consider wireless modems that keep devices tethered to the cloud, said Hilary Kramer, who hosts the nationally aired “Millionaire Maker” radio program and leads the GameChangers and Value Authority advisory services.

Both San Diego-based Qualcomm Inc. (NASDAQ:QCOM), a provider of semiconductors, software and services to support wireless technology, and San Jose, California-based Broadcom Inc. (NASDAQ:AVGO), a developer, designer, manufacturer and supplier of semiconductor and infrastructure software products, pay dividends. Thus, the annual income puts investors 2% to 3% above breakeven before the potential appreciation of their share prices, Kramer counseled.

“QCOM has been less aggressive historically but the future may accelerate its yield trajectory and, even if the gains ahead only match the recent past, your income will still stay ahead of anticipated inflation,” Kramer said.

Paul Dykewicz conducts a pre-COVID-19 interview with Hilary Kramer, whose premium advisory services include IPO Edge, 2-Day Trader, Turbo Trader and Inner Circle.

Qualcomm, seeking to bring mobile service to industries such as automotives, the internet of things and computing, delivered year-over-year growth for the fiscal second quarter ended March 28, 2021, led by sustained global demand for smartphones and by increasing the scale of our non-handset revenues, said Steve Mollenkopf, Qualcomm’s chief executive officer. The company is “well positioned for continued growth,” he added.

Revenues jumped 52% to $7.935 billion during the latest second quarter, while earnings before interest, taxes, depreciation and amortization (EBITDA) soared 256% during the same period. Plus, Qualcomm paid $2.3 billion to stockholders, including $734 million, or $0.65 per share, in cash dividends and $1.5 billion through repurchases of 11 million shares of common stock during the second quarter.

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Broadcom (AVGO) Earns Berth Among Five Dividend-paying Cloud Stocks to Purchase

“AVGO has expanded fast enough to sweeten its quarterly per-share payout from $0.49 to $3.60 in the past five years,” Kramer said. “If that continues into a world of 5G networking and ubiquitous machine-to-machine communications, the 3% you lock in today might become something more like 20% by the time 2026 rolls around.”

BoA Global Research described Broadcom as a buy and gave the stock a $550 price objective, based on 20x 2022 estimated enterprise value / free cash flow, below the median for large-cap diversified peers of 25x. The difference stems from AVGO’s higher debt leverage and reliance on software mergers and acquisitions.

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Downside threats to the price objective, according to BoA Global Research, are: 1) semiconductor cycle risks such as sensitivity to U.S./China trade relations, 2) high exposure to Apple (NASDAQ: AAPL), 3) competitive risks in networking, smartphone, storage, enterprise software markets, 4) its role as a frequent acquirer of assets that increase financial and integration risks, and 5) recent strategy towards moving into non-core software businesses creates mis-execution risks.

Despite Broadcom facing its most significant supply constraints in company history, the outlook for such “cloud titans” improved compared to three months ago, according to BoA.

NVIDIA Secures Place Among Five Dividend-paying Cloud Stocks to Purchase

NVIDIA Corporation (NVDA) showed off its data center at the company’s recent analyst day and is projected to have a strong 2021 with roughly 30% year over year growth, according to BoA. The investment firm rates NVIDIA as a buy and gave it a $700 price objective, based on 44x 2022 estimated P/E, excluding cash, to approach the higher end of NVIDIA’s historical 20x-54x P/E range. The value reflects NVIDIA’s long-term growth outlook in large, underpenetrated markets.

Risks that may block NVIDIA from meeting BoA’s price objective are: 1) exposure to the personal computer market, 2) competition with Intel and others in the accelerated computing markets and with rival auto vendors, 3) unpredictable sales in new enterprise, data center and autos markets, 4) possible decelerating capital returns, 5) potential auto sales slowdown until advanced driver-assistance systems (ADAS) become more meaningful, and 6) elevated growth in operating expenses.

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Cloudera Offers Non-Dividend Alternative to Five Dividend-paying Cloud Stocks to Purchase

For “blue-sky growth,” Kramer described herself as a fan of non-dividend-paying Cloudera Inc. (NASDAQ:CLDR), a Palo Alto, California-based provider of enterprise data cloud services. She added it was just a $5 stock several years ago.

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“As the name implies, the company makes the software that runs corporate clouds, so it’s a pure play compared to sprawling giants like Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT) and Alphabet Inc. (NASDAQ:GOOG) where the cloud is only part of the larger footprint,” Kramer said. “CLDR is still small with revenue on track to hit $1 billion in early 2023, but it is also a small stock at barely $3.5 billion in market capitalization… 0.18% the size of mighty AMZN with vast room to make shareholders happy as it closes the gap. Even at this scale, CLDR is profitable. I expect great things ahead.”

Advanced Micro Devices Serves as a Second Non-Dividend Prospect Outside Five Dividend-paying Cloud Stocks to Purchase

Advanced Micro Devices, Inc (NASDAQ:AMD) notched a buy rating and a price objective of $110 from BoA, based on 42x of an estimated 2022 non-GAAP earnings per share. The outlook is well supported by AMD’s potential to enlarge its share in large markets, BoA added.

Downside risks to AMD are: 1) sharp correction in share price following strong rally to-date, 2) strong competition from larger rivals, 3) lumpy nature of consumer and enterprise spending that could create delays in acceptance and success of new products, 4) reliance on multiple outsourced manufacturing partners, 5) maturity of current game console cycle.

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Intel’s Underperform Rating by BoA Puts It Outside Five Dividend-paying Cloud Stocks to Purchase

Fans of Intel (NASDAQ:INTC) should beware that BoA put an “underperform” rating on the San Jose, California-based semiconductor maker. BoA’s $62 price objective on Intel is based on 13x its 2022 earnings per share estimate, which comes in at the low end of Intel’s peers. However, BoA described the rating as appropriate due to manufacturing uncertainties and risks flowing from Intel’s new foundry strategy.

But BoA added that Intel could surprise on the upside with: 1) clarity or breakthrough on yields for 7nm process technology, 2) new products limiting potential market share loss, 3) improving product mix to aid gross margins, 4) manufacturing slip-ups at key foundry competitors. Risks to Intel’s share price include: 1) weaker-than-expected trends in a mature personal computer market, which is Intel’s largest revenue generator, 2) further delays in 7nm process technology and roadmap, 3) accelerated share loss to AMD, 4) more competition in the profitable data center market.

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Five Dividend-paying Cloud Stocks to Purchase Evade COVID-19 Collapse

More than 45% of adults in America have been fully vaccinated against COVID-19 so far, according to data from the U.S. Centers for Disease Control and Prevention. The progress raises hope that new cases and deaths could slow significantly.

Additional optimism is fueled by the Food and Drug Administration (FDA) recently approving a third COVID-19 vaccine to be put to use. That Johnson & Johnson (NYSE:JNJ) vaccine only requires one dose rather than the two that are required for the vaccines of earlier market entrants Pfizer Inc. (NYSE:PFE) and Moderna Inc. (NASDAQ:MRNA), respectively

COVID-19 cases worldwide reached 165,547,299, with 3,430,890 deaths, as of May 21, according to Johns Hopkins University. Also on that date, U.S. COVID-19 cases totaled 33,056,853 and were blamed for 588,539 deaths. America has the dreaded distinction as the nation with the most COVID-19 cases and deaths.

The five dividend-paying cloud stocks to purchase provide investors with ways to try to profit from a recent $1.9 trillion federal stimulus package, sharply increased COVID-19 vaccine availability and an ongoing economic reopening. Those catalysts seem certain to build momentum for the five dividend-paying cloud stocks to purchase, especially with all of them currently trading below their recent highs.