September has been a rough month for many tech stocks. Concerns about frothy valuations, the Fed's tapering efforts, and a potential financial crisis in China torpedoed many high-flying tech stocks.
However, many slower-growth, dividend-paying names in the sector have fared well as investors rotate toward more conservative stocks. Let's take a closer look at three of those resilient stalwarts -- Accenture (ACN -0.09%), Broadcom (AVGO -0.82%), and Cisco (CSCO -0.65%) -- and see why they're worth buying as other high-growth tech stocks lose their luster.
Accenture, one of the largest IT services companies in the world, might not seem like a great income stock. Its forward dividend yield of 1.1% is decent, but it's lower than the yields of many other blue-chip tech stocks.
However, Accenture arguably offers a much better balance of growth, value, and income than its peers. Between fiscal 2010 and 2020, its revenue more than doubled from $21.6 billion to $44.3 billion. In that same period, its earnings per share (EPS) nearly tripled.
Accenture has consistently grown its top line by acquiring smaller IT companies and increasing its number of outsourced IT professionals worldwide. The business is well diversified across a wide range of industries, and it has been profiting from their growing appetite for technological upgrades.
The company also exercised tight cost controls, constantly repurchased its shares, and raised its dividend annually for nearly a decade. It spent just 24% of its free cash flow (FCF) on its dividend over the past 12 months, which gives it plenty of room for future hikes.
Accenture stock rallied about 530% over the past ten years. If we factor in dividends, it generated a total return of nearly 660%. IBM, which competes against Accenture in the IT services market and offers a much higher yield, delivered a total return of less than 10% in the past decade.
Broadcom, one of the largest chipmakers and infrastructure software companies in the world, pays a forward dividend yield of 2.9%. It doesn't consistently raise its dividend every year, but it spent just 46% of its FCF on those payments over the past 12 months.
Like Accenture, Broadcom constantly expands its business with big acquisitions. The chipmaker -- which was formerly known as Avago before it acquired the original Broadcom in 2016 -- grew its annual revenue more than eleven times over the past decade as earnings per share almost tripled.
The stock has soared an impressive 1,290% over the past ten years, and it generated a whopping total return of 1,640%. By comparison, Texas Instruments, which returns most of its excess cash to shareholders instead of pursuing big acquisitions, generated a total return of about 830% during the same period.
Broadcom suffered a slowdown last year as the pandemic disrupted its automotive and industrial markets, but those headwinds are waning, and its growth is accelerating. It's also fairly well insulated from the global chip shortage since most of its chips are manufactured on larger nodes instead of the smaller ones that are saturated with orders for new chips.
3. Cisco Systems
Cisco, the world's largest maker of networking routers and switches, grew its annual revenue from $43.2 billion in fiscal 2011 to $49.8 billion in fiscal 2021.
That revenue growth might not be the most impressive, but Cisco's adjusted EPS doubled during that decade as it repurchased over a fifth of its shares, divested weak businesses, acquired new ones, and expanded its higher-margin software and subscription divisions.
Cisco stock rallied about 250% over the past decade, coming in slightly below the return of the S&P 500 in that period. However, its total return of 370% outperformed the broad market. Cisco has also raised its dividend every year since its first payment in 2011 as it currently pays a forward dividend yield of 2.7%. The payout still has room to run with just 42% of Cisco's FCF going to the dividend over the past 12 months.
At its recent investor day, Cisco said it would continue to return at least 50% of its FCF to investors via buybacks and dividends between fiscal 2021 and 2025. It also predicted its annual revenue and adjusted EPS would both grow at a compound annual growth rate of 5% to 7% during that period.
That stable outlook indicates Cisco won't experience another cyclical slowdown anytime soon, and it will likely remain a more reliable investment than many other blue-chip tech stocks.
The right balance at the right price
Accenture, Broadcom, and Cisco might not seem like exciting tech plays, but they've consistently rewarded patient investors, and their stocks remain reasonably valued. Accenture trades at 34 times forward earnings, while Broadcom and Cisco have P/E ratios of 18 and 16, respectively.
Investors shouldn't judge these stocks based on their past performance alone, but they have strong potential to deliver steady dividends and returns to shareholders, even as hotter tech stocks burn out.