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2 Tech Dividend Stocks to Buy This Month

The uncertainty surrounding the broader economy might lead to a resumption of the market’s sell-off. Next week’s Congressional negotiations could also bring some volatility. Given the technology sector’s solid growth prospects, it could be wise to invest in dividend-paying tech stocks NetApp (NTAP) and ASE Technology Holdings (ASX) to secure a stable stream of income.

The Chinese real-estate giant Evergrande’s possible collapse has increased volatility. Many analysts are increasingly concerned about the growth outlook for next year. With concerns over higher-than-expected inflation and Covid variants, Federated Hermes’ chief market strategist Phil Orlando anticipates a 10% market correction. Next week, the administration faces deadlines with the Democrats pushing to pass the infrastructure and social services bill, which may mean a frantic time for the market and increasing volatility.

However, the technology sector has witnessed substantial growth over the past year, with continued digital transformation and work-from-home trends. The Technology Select Sector SPDR ETF (XLK) gained 36.2% over the past year and 19.4% year-to-date. Amid the anticipated market volatility, dividend-paying stocks could be the right choice for ensuring a steady income stream.

Given this backdrop, NetApp, Inc. (NTAP) and ASE Technology Holding Co., Ltd. (ASX), which pay attractive dividends and possess solid growth prospects, could be good additions to your portfolio this month.

NetApp, Inc. (NTAP)

NTAP operates as a hybrid cloud data services and data management company. The company’s offerings include cloud storage services, cloud control solutions, and other cloud services and analytics.

On June 22, NTAP acquired Paris based managed platform provider, Data Mechanics. Cloud enterprise applications are gaining traction in recent times, and the company expects this acquisition to enable it to make cloud strategies less costly and simpler for its customers and better serve them on their cloud initiatives.

Earlier in June, NTAP unveiled its new software, ONTAP. The software is expected to leverage hybrid cloud data across all major public clouds to provide customers with an enhanced experience. About this launch and the strategy aimed at hybrid cloud solutions, Kim Stevenson, Senior Vice President and General Manager, foundational data services business unit at NTAP, said, “A hybrid cloud strategy is critical to ensuring organizations can keep pace with the growth and complexity of distributed data and applications, thrive in the face of uncertainty and compete effectively in the digital economy.” 

The company declared a quarterly dividend of $0.50, payable on October 27, 2021. NTAP’s annual dividend of $2.00 yields 2.13% on the current price. The company’s dividend payouts have increased at a CAGR of 21.6% over the past five years. NTAP has a record of seven years of consecutive dividend growth.

In the first fiscal quarter of 2022 ended July 30, NTAP’s net revenues increased 11.9% year-over-year to $1.46 billion. Non-GAAP gross profit went up 14% from the prior-year quarter to $1.01 billion. Non-GAAP income from operations and non-GAAP EPS stood at $336 million and $1.15, up 57.7% and 57.5% year-over-year, respectively.

The consensus EPS estimate of $4.99 for the current year (fiscal 2022) indicates a 22.9% year-over-year increase. Likewise, the consensus revenue estimate of $6.25 billion for the ongoing year reflects a rise of 8.9% from the prior year. Moreover, NTAP has an impressive surprise earnings history as it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 123.7% over the past year to close yesterday’s trading session at $93.86.

NTAP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

NTAP has a Quality grade of A. In the 3-stock, A-rated Technology – Storage industry, it is ranked #2.

Click here to see the additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for NTAP.

ASE Technology Holding Co., Ltd. (ASX)

ASX operates in the field of semiconductor packaging, testing, and production of interconnect materials internationally. The company is headquartered in Kaohsiung, Taiwan.

In August, ASX received GSMA SAS-UP certification, enabling the company to ensure high-level security in the eSIM (embedded SIM) products. The rapidly growing popularity of 5G and eSIM might harness the company's growth by creating new business opportunities.

ASX’s annual dividend of $0.30 yields 3.60% on the current price. The dividend is payable on October 7, 2021.

In the second fiscal quarter ended June 30, ASX’s total net revenues increased 18% year-over-year to NT$126.93 billion ($4.58 billion). Operating income came in at NT$13.17 billion ($475.30 million), up 56.3% from the same period last year. Net income attributable to shareholders of the parent went up 49% from the prior-year quarter to NT$10.34 billion ($372.98 million). Earnings per equivalent ADS rose 53.3% year-over-year to $0.16.

Street EPS estimate of $0.20 for the current quarter (ending September 2021) indicates an increase of 100% from the prior-year quarter. Likewise, the consensus revenue estimate for the current quarter of $5.41 billion reflects a 28.8% year-over-year increase. Moreover, ASX has beat consensus EPS estimates in each of the trailing four quarters, which is impressive.

ASX’s stock has gained 107.4% over the past year and 43.5% year-to-date to close yesterday’s trading session at $8.38.

ASX has an overall rating of B, which translates to Buy in our POWR Rating system. The stock has an A grade for Value and Momentum, and a B grade for Stability and Sentiment. In the 97-stock Semiconductor & Wireless Chip industry, it is ranked #29. This industry is rated B.

Click here to see the additional POWR Ratings for ASX (Growth and Quality).

NTAP shares were trading at $92.54 per share on Tuesday afternoon, down $1.32 (-1.41%). Year-to-date, NTAP has gained 42.53%, versus a 17.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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