Market volatility continues as the coronavirus spreads more quickly outside of China across the globe, including in the U.S. The Dow, the S&P 500, and the Nasdaq have all plummeted toward bear market territory, down nearly 20% from their recent highs.
Apple AAPL, Microsoft MSFT, and other tech giants sent early warning signs to Wall Street about the impact the novel coronavirus might have due to the downturn in both supply and demand in China. Now, as the virus spreads, the impact could be worse. However, there are signs that things are starting to return to a state of normalcy in the world’s second-largest economy after weeks of containment efforts.
Meanwhile, Italy is on lockdown and U.S. states and cities are making efforts to curb the spread. Congress and the White House are taking steps to mitigate the economic impact in the U.S. Plus, the Fed has already cut its benchmark interest rate by half a percentage point and analysts expect to see another cut soon.
Amid all the uncertainty, the yield on the 10-year U.S. Treasury note earlier this week fell to an all-time intraday low of below 0.40% and it currently rest at around 0.77%—over 1% below where it began 2020 at 1.87%.
Given the ultra-low yields and the already beaten-down market, investors are likely still on the hunt for some solid stocks to buy or add to their watchlists. With this in mind, here are three highly-ranked semiconductor stocks that also pay a dividend that investors might want to consider at the moment…
Lam Research Corporation LRCX
Lam Research is a global supplier of wafer fabrication equipment and services for the semiconductor industry. The firm in late January topped our Q2 fiscal 2020 estimates. More recently, on March 3 LRCX released what it calls the most “innovative etch product that has been developed in the last 20 years.” The new Sense.i platform will help produce finer 3D details on chips amid ever more complex smartphones, devices, and more.
LRCX currently pays an annualized dividend of $4.60 a share, for a 1.65% yield. The company has also consistently raised its dividend, with its payout up 21% against 2018’s $3.80. Lam Research executives said at its recent investor day that the firm plans to return 75% to 100% of free cash flow in the near term to investors via buybacks and dividends.
LRCX’s strong post-release earnings estimate revision activity—Q3’s consensus up 17% and fiscal 2020 up 12%—helps it earn a Zacks Rank #2 (Buy). Our current Zacks estimates call for Lam Research’s adjusted 2020 earnings to surge 15.6% and another 20% in fiscal 2021. LRCX’s revenue is set to jump 9.1%, with 2021 projected to come in 12.6% higher at $11.86 billion.
Lam Research’s Semiconductor Equipment - Wafer Fabrication industry currently rests in the top 5% of our more than 250 Zacks industries. LRCX also holds an overall “B” VGM score, due to its strong Value score—trading at a discount against its industry. Shares of Lam Research have fallen as part of the broader market selloff, down about 20% in the last month. Still, LRCX stock is up over 55% in that last year and 125% in the last three years to outpace its industry’s 67% average climb,
Applied Materials, Inc. AMAT
Applied Materials is a semiconductor equipment firm. AMAT is a leader in “materials engineering solutions” that are used to make “virtually every new chip and advanced display in the world” and management is confident it will thrive in the big-data and artificial intelligence age. Applied Materials in mid-February beat our Q1 2020 earnings and sales estimates, with quarterly revenue up 11% and adjusted earnings up 21%.
AMAT is currently trading at 12.8X forward 12-month earnings estimates, which marks a solid discount against its industry’s 17.7X average. The firm, which is part of the same strong industry as LRCX, pays an annualized dividend of $0.84 a share, for a yield of 1.59%. Applied Materials also returns value to shareholders via buybacks and its impressive earnings revisions activity helps it hold a Zacks Rank #1 (Strong Buy) right now.
Peeking ahead, AMAT’s revenue is projected to surge 20% in fiscal 2020 and another 9.9% in 2021 to hit $19.24 billion. On the bottom-line, its adjusted FY20 EPS figure is projected to skyrocket over 36%, with 2021 expected to come in another 15.4% higher. And shares of Applied Materials are still up 35% in the last year despite its coronavirus-induced roughly 20% drop in the last serval weeks.
Intel is the largest semiconductor maker in the U.S. by revenue. The historic chip powerhouse topped our fourth quarter estimates in late January, driven by data-center and PC demand. INTC also upped its guidance and noted that it is set to benefit from the on-going expansion of the cloud computing market and more. “Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns,” CEO Bob Swan said in prepared remarks.
Our Zacks estimates call for Intel’s fiscal 2020 revenue to jump 2.2% to help lift its bottom-line by 2.5%. Then the company’s adjusted 2021 EPS figure is projected to pop another 2.1%, on 1.2% stronger sales. Like all of its peers on this list, Intel boasts strong post-release earnings revision activity. This positivity helps it earn a Zacks Rank #1 (Strong Buy), alongside its “B” grade for Growth in our Style Scores system.
On the payout front, Intel last quarter announced that it raised its annualized dividend by 5%. The firm’s new annualized dividend sits at $1.32 a share for a 2.50% yield. Meanwhile, INTC is trading at 10.7X forward 12-month earnings estimates. This marks a discount against its industry’s 14.3X average and its own three-year median of 12.1X.
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