As a new year begins, investors should review their portfolios and see if they're well-insulated from rising inflation, higher interest rates, and other macroeconomic headwinds. Those challenges can crush high-growth tech companies that aren't profitable and trade at frothy valuations.
However, blue-chip tech stocks that have wide moats, pay high dividends, and trade at low valuations will remain more resilient during a market downturn. Here are three stocks that fit that description: HP (HPQ -0.11%), Juniper Networks (JNPR -0.64%), and Broadcom (AVGO 2.02%). Let's find out a bit more about these three high-yield tech stocks.
Image source: Getty Images.
1. HP
HP is one of the world's largest producers of PCs and printers. Both businesses grew during the pandemic as work-from-home trends and DIY projects sparked fresh demand for new PCs and printers, respectively.
HP's consumer-facing business faced tough post-lockdown comparisons throughout 2021, but the growth of its commercial business offset that slowdown as more businesses reopened and upgraded their aging systems.
HP's revenue and adjusted earnings rose 12% and 66%, respectively, in 2021. Analysts expect its revenue and adjusted earnings to grow another 3% and 10%, respectively, in 2022, as its year-over-year comparisons stabilize.
HP also returned more than 100% of its free cash flow (FCF) to its investors via buybacks and dividends in 2021. It's reduced its share count by 36% over the past five years, and it's boosted its dividend every year since it spun off Hewlett-Packard Enterprise in late 2015.
HP currently pays a forward dividend yield of 2.7% and its stock still looks cheap at less than nine times forward earnings. Its high yield, low valuation, and stable growth rates make it a solid stock to own in a wobbly market.
2. Juniper Networks
Juniper sells networking switches, routers, and security software. It's a lot smaller than market leader Cisco, but it continues to grow at a steady rate as it sells more cloud-ready hardware and services to offset the slower growth of its legacy service provider products.
Juniper struggled in 2020 as the pandemic and other macro headwinds throttled demand for its products. Its supply chain and logistics expenses also soared and offset the growth of its higher-margin software business. But in the first nine months of 2021, its revenue rose 7% and its adjusted earnings per share stayed flat as those headwinds gradually waned.
For the full year, analysts expect Juniper's revenue and earnings to rise 6% and 11%, respectively, as its enterprise campus and data center customers resume their network upgrades. Next year, they expect its revenue and earnings to grow 5% and 14%, respectively.
Juniper pays a forward dividend yield of 2.2%. It doesn't consistently raise that payout every single year, but it spent just 44% of its FCF on its dividend over the past 12 months -- so it has plenty of room for future hikes. Its stock also still looks cheap at 18 times forward earnings.
3. Broadcom
Broadcom produces a wide range of chips for the data center, networking, data storage, and industrial markets. It also owns a smaller infrastructure software business, which it established through a series of big acquisitions.
Broadcom experienced a slowdown in 2020 as the pandemic disrupted its networking, automotive, and industrial markets. However, the inorganic growth of its infrastructure software business partly cushioned that blow.
In 2021, Broadcom's revenue and adjusted earnings rose 15% and 26%, respectively, as those end markets stabilized. Analysts expect its revenue and earnings to grow another 12% and 18%, respectively, this year.
Broadcom's stock still looks reasonably valued at 21 times forward earnings, and it pays a forward dividend yield of 2.5%. It's raised that payout annually ever since Avago bought the original Broadcom and inherited its brand in 2016, and its dividend consumed just 47% of its FCF over the past 12 months.
Investors looking for a well-diversified semiconductor play that will benefit from the secular growth of next-gen markets -- like driverless cars and the industrial Internet of Things (IoT) -- should take a closer look at Broadcom.
